A commercial lease is a legally binding agreement between a landlord and tenant for the rental of commercial premises. You should not enter into a commercial lease with the intention of ending your lease prior to the expiry date or without first seeking legal advice on the terms of the lease. Nevertheless, circumstances change, and you may find that ending your lease is in your best interest. Although it may be in your best interest, it is important to understand there is never any guarantee that a lease can be terminated early and without cause under the lease terms. Every lease is different, and it is vital that you seek legal advice to achieve the best outcome with minimum risk to your interests. This article provides a general overview of the most common approaches to ending your lease early in Queensland.
Mutual Agreement
For most tenants. the simplest approach to ending your lease early is to request a surrender of the lease. There is no obligation on the landlord to agree to surrendering the lease however, in some circumstances, landlords may consider such a request if the surrender is beneficial to their interests or future plans for the premises. Surrendering the lease is effected by way of a Deed of Surrender which commonly outlines any costs involved in the surrender (it is important to note that some landlords will charge a surrender fee and/or on charge to you their legal costs associated with drafting the surrender documents), any preconditions required by the parties to give effect to the surrender, any make good obligations, and most importantly, the Deed of Surrender should include a release of your obligations under the lease from the surrender date.
Where is a lease is registered on the property’s title, there should also be a supporting ‘Form 8 Surrender of Lease’ executed by the parties and lodged with the Queensland Titles Office to remove the lease interest from the property title.
Assignment
An assignment is the process of transferring your lease obligations and rights to a new tenant. When the lease is assigned, the new tenant takes on your current lease, becoming liable under the lease and permitting the new tenant to take possession of the premises. Most leases outline the landlord’s requirements for an assignment which typically relate to the new tenant (the “assignee”) providing the landlord with financial documents and details of their business experience to allow the landlord to assess whether the assignee is a suitable tenant for the premises.
An assignment is facilitated by way of a Deed of Consent to Assignment which outlines the preconditions to the landlord’s consent and recognises the assignee as the tenant from the date of assignment. It is important that you seek legal advice in relation to the Deed of Consent to Assignment to ensure that you are released of your obligations under the lease as this is not always a standard term of an assignment deed. In these cases, the landlord may continue to hold you liable under the lease in addition to the assignee. There is no obligation on the landlord to release you of your obligations under a commercial lease however, by seeking legal advice, negotiations may be undertaken to push for a release of your lease obligations and best protect your interests after the assignment.
It is important to note that there are additional considerations where your lease is classed as a retail lease under the Retail Shop Leases Act 1994 (Qld) (“the Act”). To assign a retail lease, you must provide the new tenant with a ‘Form 9’ disclosure statement which outlines essential terms of the lease that the new tenant should be aware of. By providing a disclosure statement, you may be eligible for a release of your lease obligations under the Act provided you have otherwise complied with the Act. Please note that the Act only applies to retail leases, and not all commercial leases are retail leases.
If you are looking to end your lease early, please do not hesitate to contact us at The Small Business Lawyer to assess your lease and the most suitable approach in seeking the termination of the lease to ensure the best outcome is achieved.
