BUSINESS INFORMATION
Ending a lease
A lease may come to an end for several reasons, including its natural expiration, property redevelopment, breach of contract by either party, or a mutual decision to terminate the agreement.
A lease can end for reasons including expiry, redevelopment, default or termination by mutual agreement.
Lease Expiry Without Renewal Options
When the lease term ends and no renewal options remain, tenants are typically required to vacate the property by the specified date unless a new lease is negotiated. A new lease may introduce revised terms, such as increased rent, or may have different terms and conditions.
If you wish to continue occupying the premises, it is advisable to reach out to your landlord or their representative well in advance of the lease expiration. This allows you to confirm whether a renewal is possible and to understand the updated terms. Early communication also provides sufficient time to consider alternative arrangements if the lease cannot be renewed.
In some cases, tenants may be permitted to remain on the property after the lease expires by transitioning to a periodic lease, where rent is paid on a fortnightly or monthly basis. However, periodic leases generally offer fewer protections compared to fixed-term leases. For example, landlords can typically terminate a periodic lease by providing a one-month written notice to vacate, with no requirement to specify a reason.
- You should consider the risk to your business by not having a fixed term lease.
- A written lease will help you to avoid future disagreements or disputes.
Make good requirements
When vacating a leased property, you are typically required to return it to its original condition as it was at the beginning of the lease—a process commonly referred to as “make good.” It is essential to review your lease agreement well before the lease expiration to fully understand your responsibilities.
The lease may include specific clauses that outline your obligations, such as removing any installed fixtures or fit outs, repairing damages, replacing carpets, repainting walls, and thoroughly cleaning the premises. These requirements should be clearly stated in the lease, with allowances made for reasonable wear and tear. If you have a property condition report from the start of your lease, it can serve as a valuable reference during the make-good process.
Be sure to allocate sufficient time before the lease ends to complete these tasks. Failing to meet these obligations could result in the landlord withholding your security deposit or imposing additional charges for repairs or cleaning.
Read our tips on how to make good at the end of your lease to find out more.
Ensure you obtain written confirmation from the landlord stating that the ‘make good’ process has been completed to their satisfaction before returning the keys or vacating the property.
Bond and guarantee
After completing the make-good process and vacating the premises, the landlord is expected to release your bond and/or guarantee. However, the lease may permit the landlord to withhold or utilize the bond under certain conditions. Review your lease agreement to confirm if a specific timeframe for the bond’s return is outlined. If no timeframe is specified, the bond should be returned within a reasonable period.
Redevelopment of premises
A redevelopment clause in the lease may grant the landlord the right to terminate the agreement prematurely to carry out significant renovations or redevelopment. This could result in the loss of your premises, potentially disrupting your business, particularly if your goodwill is tied to the location.
If your lease includes a relocation clause, verify whether compensation for trade losses and relocation expenses was negotiated.
Default due to non-payment of rent
If rent payments are not made on time, most lease agreements allow the landlord to terminate the lease and reclaim possession of the premises without prior notice. In such scenarios, you may lose access to the property for business purposes or to retrieve personal belongings.
You can negotiate with the landlord for access to collect your belongings. Typically, they are not permitted to retain or sell your items unless explicitly stated in the lease. If you fail to claim your belongings, the Disposal of Uncollected Goods Act 1970 will likely govern the situation.
Your lease should specify the process for providing written notice of default and the steps the landlord may take if the issue remains unresolved within a reasonable timeframe. The landlord generally has the right to recover all outstanding payments, including interest, up to the lease’s end date.
Termination by mutual agreement
The landlord and tenant can mutually agree to terminate the lease early if it serves both parties’ interests. If you need to end the lease prematurely, discuss this with your landlord. While they are not obligated to release you from the agreement, they may be willing to negotiate, especially if you are experiencing financial hardship or other unforeseen circumstances.
Useful resources
Leasing business premises: A commercial and practical guide
This guide highlights some of the main issues to consider and can assist you in avoiding some of the common pitfalls associated with leasing business premises.
How to negotiate your way to a better lease
This practical guide highlights some of the main issues to consider when negotiating a retail lease. It also identifies some less obvious issues that frequently create problems for the tenant after the lease has commenced.
Common questions about the Commercial Tenancy Act: for leases entered into on or after 1 January 2013
This guide provides information and general guidance for landlords and tenants that have entered into a leasing agreement on or after 1 January 2013.
DCK ENTERPRISE HELPLINE
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