How can you get out of a commercial lease?

Jan 23, 2023 | Publication

It is important to know what the options are open to tenants/lessees to get out of or end a commercial lease.

It is not generally possible to just walk away from a lease.

Some of the options to ‘get out of a lease’ include to:

1 Terminate the lease. A lease may have a termination clause or break clause that can enable early termination. Careful examination of such clauses is important. There may be costs associated with exercising rights under such a clause.

2 Surrender the lease. A lessor and lessee can by mutual agreement end a lease. The terms of the surrender can be negotiated. Costs may be involved. A deed of surrender can be prepared. If properly prepared the deed can bring to an end the lease obligations.

3 Assignment of lease. A lessee can transfer its rights and obligations to a new lessee. There may be a provision in the lease which enables this to be done. The lessor’s consent may be required. There is often a provision that says that a lessor cannot unreasonably withhold consent.

4 Subletting a lease. Part or all of the premises may be capable of being sub-let.

5 Licensing. A lessee may agree to licence part of the premise. Normally a licence does not enable exclusive use of a premises.

It is important to obtain prompt legal advice regarding your options. For an obligation free consultation please call Steve McAuley on (02) 9633 1826.

The information in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, we do not guarantee that the information in this publication is accurate at the date it is received or that it will continue to be accurate in the future. We are not responsible for the information of any source to which a link is provided or reference is made and exclude all liability in connection with use of these sources. If you do not wish to receive newsletters from us, please let us know.

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