Commercial Leasing Series: How can I end my lease early?

August 26, 2020

Maybe there was a change in the business climate, maybe your business just didn’t take off the way you thought it would, perhaps you have been so successful you need larger premises. Whatever the reason, you may find yourself in a situation where you need to end your commercial lease before the end of the lease term. However, it is not as simple as returning the keys and just walking away.

Surrender of Lease

One option is approaching the Landlord and requesting a surrender of lease. A surrender of lease is when both you and the Landlord agree to end the lease.  The benefit of a lease surrender is that it will bring an end to your legal obligations.

The Landlord has no obligation to agree to the surrender but may be willing to negotiate. The terms of the surrender are also open to negotiation. If the Landlord agrees to surrender your lease, you may need to pay a surrender fee and will often have to pay the Landlord’s legal costs. If the Landlord agrees to surrender your lease, you should ensure that you document this in a deed of surrender. If the Lease is registered, you should ensure that the appropriate forms are lodged with the Titles Office to remove the lease from the title to the land.

Assignment of Lease

Assigning a lease is when you transfer your entire interest under the lease to a new Tenant. You may need to check the terms of your lease to ensure that you can assign your interest.

Once you have found someone who is prepared to take over your lease, you will need the consent of the Landlord. The following requirements for assignment or subletting are usually found in most leases:

• A request for assignment or subletting will need to be made in writing to the Landlord. This request will need to include information about the business and financial resources of the proposed assignee;
• A deed of assignment will need to be prepared and signed by the parties; and
• The Tenant will often need to pay the Landlord’s legal and other costs relating to providing consent or otherwise.

Subletting the Premises

Another alternative is subletting the whole or part of the premises. Subletting the premises will also require the Landlord’s consent. It is important to note that if you choose to sublet, this option will not release you from your obligations under the lease. While the subtenant will be legally responsible to you, you will still be legally responsible to the Landlord for the entire lease.  These requirements for the Landlord’s consent to a sublease are generally very similar to the ones surrounding an assignment.

If you have any questions about surrendering, assigning or subletting your lease please contact a member of our Property team at Fox and Thomas.