Leases, whether retail or commercial, typically provide a fixed term, giving the lessee certainty about occupancy. However, circumstances may arise where early termination is necessary. Understanding your rights and obligations under Queensland law is essential to avoid penalties or legal disputes.
Lessor’s Right to Terminate a Lease
A lessor in Queensland may terminate a lease on specific grounds, which must be expressly included in the lease agreement:
- Lessee Breach
If the lessee breaches a term of the lease, the lessor may have the right to terminate, provided the lease contains a clause allowing termination. Some breaches may not qualify, depending on the lease wording.
- Demolition of Premises
A lessor may terminate a lease if demolition is necessary. The Retail Shop Leases Act 1994 (Qld) requires the lessor to provide at least six months’ written notice with:
- Details of the proposed demolition
- The termination date of the lease
The lessor may also need to compensate the lessee for damages caused by fit-outs if demolition does not proceed within a reasonable time after termination.
- Refurbishment or Relocation
Some leases include clauses allowing termination due to refurbishment or refitting. Alternatively, the lessor may offer to relocate the lessee to comparable premises. Under Queensland law, the notice must include:
- Details of refurbishment works
- Information on alternative premises
- Relocation date, at least three months after notice
Important: For commercial leases in Queensland, if these clauses are not in the lease, the lessor cannot rely on them to terminate.
Lessee’s Right to Terminate a Lease
Lessees also have options under Queensland law:
- Early Termination Clause
Some leases include a clause allowing either party to terminate early, often with penalties such as paying rent until a new tenant is found.
- Lessor Breach
If the lessor breaches the lease, the lessee may terminate, but only if the lease specifically allows termination under these circumstances.
- Mutual Agreement
Both parties can agree to terminate early. Often, a surrender fee or other compensation may apply. There is no legal obligation for the lessor to agree.
- Misrepresentation by Lessor
At common law, a lessee may terminate if they can show:
- The lessor made a false representation relied upon when signing
- The lessee suffered detriment due to the false representation
- Reliance on the misrepresentation was reasonable
- The lessee would not have entered the lease if the truth were known
Consequences of Improper Termination
Improper termination by either party can result in liability for losses caused, including:
- Rent and outgoings
- Costs of locating new premises (for lessees)
- Costs of advertising to secure a new tenant (for lessors)
Alternatives to Early Termination
- Assigning the Lease
The lessee transfers their rights and obligations to a new tenant. Benefits include:
- Early exit while the lease remains in effect
- Lease clauses usually require lessor approval
- Sub-Leasing
The lessee transfers part of their interest to a third party. This can:
- Reduce costs while remaining in the premises
- Maintain responsibility for the new tenant’s actions under the lease
Key Takeaways for Queensland Leases
- Always check the lease for early termination clauses
- Lessor termination rights are limited to lease clauses and Queensland law
- Lessees have options such as assignment or sub-leasing to exit early
- Improper termination can result in financial liability for both parties
NB Property Law provides expert advice on drafting, reviewing, and negotiating retail and commercial leases in Queensland. Our team can help ensure your lease protects your rights, clarifies termination obligations, and avoids costly disputes.
Contact NB Property Law today for guidance on early lease termination, lease assignments, or sub-leasing in Queensland.