Ending a lease
A lease can end for various reasons including:
- the lease term has expired and there are no options to renew
- redevelopment of the premises
- default due to non-payment of rent
- termination by mutual agreement
Unless otherwise agreed you must vacate the premises when your lease term has expired and any options to renew the lease have been used. Usually you will have to vacate the premises by a certain date or start negotiating a new lease. A new lease may have different terms and conditions, including higher rent.
If you want to stay in the current premises, you should write to your landlord (or their agent) well before the lease expires to determine whether they will renew it and what the terms and conditions will be. This will give you time to consider your options and look for alternative premises if you can’t renew the lease.
In some circumstances, you may be allowed to stay in the premises after your lease has expired, paying rent on a fortnightly or monthly basis. This is known as a periodic lease.
A periodic lease does not give you the same protections as a fixed term lease. For example, at any time the landlord for most periodic leases can give you one month written notice to vacate the premises.
TIP: 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 you leave the premises you will generally be required to reinstate them to the condition they were in at the start of your lease. This is commonly referred to as ‘make good’. Check for any make good clauses before you reach the end of your lease and understand your obligations.
Make good clauses can require the tenant to remove any fixtures or fit-out belonging to them, repair any damages, replace carpets, repaint walls and clean the premises. Your lease should specify what you are required to do, and allow for normal wear and tear. If you obtained a property condition report at the start of your lease you can refer to this as part of the make good.
You should allow sufficient time at the end of your lease to complete the make good requirements.
TIP: You should obtain the landlord’s agreement in writing that the ‘make good’ has been completed to their satisfaction, before you hand back the keys or vacate the premises.
Failure to agree may result in the landlord withholding your bond or charging you additional costs, such as repair and cleaning costs.
Bond and guarantee
Once you have completed your make good and vacated the premises you should receive your bond and/or guarantee release back from the landlord.
The lease may allow for the landlord to use or withhold the bond under certain conditions. Check your lease to determine whether you agreed to a certain timeframe to have your bond returned after vacating the premises. If your lease does not state a timeframe, the landlord should return the bond as soon as is reasonably possible.
A redevelopment clause may allow the landlord to terminate a lease early in order to carry out major works to renovate or redevelop the premises. In these circumstances you could find yourself without premises. This could have a severe impact on your business, particularly if your goodwill is attached to your location.
If you have agreed to a relocation clause in your lease, check to see whether you negotiated to be paid compensation for loss of trade and to cover your relocation costs.
If a tenant defaults in paying the rent on time most leases allow the landlord, without notice to the tenant, to terminate the lease and take possession of the premises.
You may find yourself unable to trade or enter the premises to collect your belongings. You can negotiate with the landlord to access the property to collect your belongings, generally, they can’t keep or sell your belongings unless specified in the lease. If you don’t claim them it’s likely the procedure outlined in the Disposal of Uncollected Goods Act 1970 will be followed.
Your lease should cover written notification of a default and the action that will be taken if it is not fixed within a reasonable time period. The landlord generally has the right to recover from you all the monies, including interest, owing up to the end of the lease.
It is possible for the landlord and the tenant to mutually agree to terminate the lease early. This may be in circumstances where it benefits both parties. If you need to terminate the lease early, you should discuss this with your landlord. They are not obliged to release you from your agreement but may be willing to negotiate if you are facing serious financial difficulties or other circumstances beyond your control.