Sapna is a content writer at Sprintlaw. She has completed a Bachelor of Laws with a Bachelor of Arts. Since graduating, she has worked primarily in the field of legal research and writing, and now helps Sprintlaw assist small businesses.
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Yes, you can often get out of a commercial lease early in Australia, but you usually need the landlord's agreement, a right in the lease, a lawful assignment or sublease, or a serious landlord breach that gives you a right to terminate. Simply handing back the keys is risky. You can still be liable for rent, outgoings, make-good and re-leasing costs until the lease is properly ended or the landlord's loss is dealt with.
If your shop, office, warehouse or clinic no longer works for your business, the safest approach is to work out your legal position first, then make a practical exit proposal. The right move depends on your lease wording, whether retail leasing laws apply in your state or territory, and how quickly the premises can be re-let.
Signing a commercial lease can feel like a big milestone for your business. You have secured a location, planned your fit-out and started building a customer base. But sometimes things change. Maybe your landlord won't fix ongoing issues. Maybe your sales have shifted online and the shopfront no longer makes sense. Maybe your business needs to downsize, relocate or close altogether.
The good news is that there are often workable pathways. The not-so-good news is that a messy exit can become expensive quickly, especially if there's a personal guarantee or a long term left on the lease.
What Does Breaking A Commercial Lease Mean?
When people say they're breaking a commercial lease, they usually mean one of two things:
- Ending the lease early lawfully, for example through a negotiated surrender, assignment, sublease, break clause or another mechanism allowed under the lease or the law.
- Leaving without agreement, which is usually a breach of contract and can trigger significant financial consequences.
A commercial lease is a legally binding contract. If you stop paying rent or abandon the premises without properly ending the lease, the landlord may be able to claim losses. Those losses can include more than unpaid rent.
Commercial Lease Vs Retail Lease
In Australia, some business premises are covered by state and territory retail leasing legislation, while others are governed mainly by the lease, general contract law and property law principles.
For example, if you run a shop in a shopping centre, you may be under a retail lease and state-based legislation may apply, like the Retail Leases Act NSW framework in New South Wales.
This matters because retail leasing laws can affect:
- disclosure requirements before and during the lease,
- whether the landlord can withhold consent to assignment,
- dispute resolution steps, often through a small business commissioner or tribunal process,
- how outgoings and costs are handled, and
- what notices may be required before termination or non-renewal.
Retail leasing rules differ across states and territories, so don't assume the NSW position is the same in Victoria, Queensland, Western Australia, South Australia, Tasmania, the ACT or the Northern Territory.
Why Just Walking Away Usually Does Not Work
Even if you return the keys, your legal obligations may continue until the lease is properly ended. Depending on the lease terms and the outcome of any negotiation, you could still be liable for:
- rent and outgoings until a replacement tenant starts,
- the landlord's reasonable costs of re-leasing, such as agent fees and advertising,
- make-good costs, such as removing fit-out and restoring the premises,
- interest on unpaid amounts,
- legal costs if the lease allows the landlord to recover them, and
- amounts covered by a personal guarantee or director guarantee.
Landlords are generally expected to take reasonable steps to reduce their loss, for example by trying to re-let the premises. But that doesn't mean you can walk away with no exposure. The argument is usually about how much loss is reasonable, not whether the lease simply disappears.
Can You Break A Commercial Lease Or Get Out Early?
Often, yes. But there's usually no automatic 30-day right to leave a fixed-term commercial lease just because the premises no longer suit your business.
Your options usually come from:
- the lease agreement, including any special conditions or break clause,
- retail leasing legislation, if it applies,
- general contract and property law principles,
- a negotiated agreement with the landlord, or
- a lawful transfer of the lease to someone else.
Start by checking the lease term, expiry date, option periods, notice requirements, permitted use, assignment and subletting clauses, make-good obligations, default clauses, dispute resolution clauses and any incentives you received when signing.
It can also be helpful to understand how rent and related charges work in your lease, especially when you're comparing the cost of staying against the cost of leaving. lease fees can include more than just base rent, such as outgoings, promotion levies, cleaning, utilities, management fees or other charges.
Do You Need To Give Notice?
If your lease is ending naturally and you don't want to renew, you'll usually need to comply with any notice requirements in the lease. Missing a notice date can be costly, especially where an option period is involved.
If your lease is periodic or rolling, month-to-month lease notice requirements can become particularly important. The required notice may come from the lease, the circumstances of the tenancy or applicable state or territory law.
If you're in NSW and either party is trying to end or enforce an occupancy arrangement, notice to vacate issues can get technical quickly. The wording, timing and method of service can matter.
What If You Do Not Have A Written Lease?
Some businesses occupy premises without a signed lease, or keep trading after an expired lease was never formally renewed. This can create uncertainty about rent increases, notice periods, repairs, outgoings and how either party can end the arrangement.
If that sounds like you, be careful. no lease agreement situations can still create enforceable obligations, and the default position may not be what you expect.
How To Break A Commercial Lease: Your Main Exit Options
There's no single best way to get out of a commercial lease. The strongest option depends on your lease, your relationship with the landlord, the condition of the premises, market demand and whether you can find someone else to take over.
1. Negotiate A Lease Surrender
A lease surrender is a written agreement where you and the landlord agree to end the lease early. This is often the cleanest exit because it documents the final position instead of leaving loose ends.
A proper surrender deed should usually cover the agreed end date, any payout or settlement amount, rent and outgoings to the exit date, make-good obligations, treatment of the bond or bank guarantee, release of personal guarantees if agreed, and whether either party can make further claims after completion.
Landlords may agree to a surrender where they can re-let quickly, they want the premises back for redevelopment, the market is strong, or a negotiated exit is more commercially sensible than chasing unpaid rent.
2. Assign The Lease To A New Tenant
An assignment transfers your lease to a new tenant, usually with the landlord's written consent. This can work well if the location is still attractive and you can find a financially sound incoming tenant.
The landlord may require financial information, references, evidence of business experience, a deed of assignment and payment of reasonable legal or administrative costs. In retail lease situations, the landlord's ability to refuse consent may be limited by retail leasing legislation, but the exact rules depend on the state or territory.
Watch out for ongoing liability. Some leases try to keep the outgoing tenant or guarantor responsible after assignment, at least for some obligations. This is a key point to negotiate before you sign any transfer documents.
3. Sublease The Premises
A sublease is where you remain the tenant under the head lease but lease all or part of the premises to another business. This can reduce rent pressure if you have excess space or need an interim solution while you restructure.
Subleasing can be useful for offices, consulting rooms, studios, warehouses and shared workspaces. However, you usually still owe rent to the landlord even if the subtenant stops paying you. You also need to check whether the head lease permits subleasing and whether landlord consent is required.
4. Use A Break Clause
Some leases include a break clause, early termination clause or relocation clause. These clauses are often strict. They may require you to give a specific period of written notice, pay all rent up to date, complete make-good, or pay a break fee.
If your lease has a break clause, follow it exactly. A notice sent late, to the wrong address or in the wrong form can create arguments about whether the lease actually ended.
5. Terminate For Landlord Breach
If the landlord has seriously breached the lease, termination may be possible. Common issues include failure to maintain essential services, unlawful interference with access or trading, serious breaches of quiet enjoyment, or misrepresentations made before signing where there's strong evidence.
This is rarely a quick self-help option. Many leases require formal notices and time for the landlord to remedy the breach. If you terminate when you don't have a legal right to do so, you may be the party in breach.
6. Plan An Exit At The End Of The Term
Sometimes the most commercially sensible option is to finish the term and avoid renewing. If your lease is coming up for renewal, timing matters. For example, lease renewal notice periods can affect how you approach your decision.
If you need to buy time, line up new premises or reduce risk, a structured runway plan can be better than a rushed early termination.
How To Terminate A Commercial Lease Early Without Penalty
It's possible to exit without a major penalty in some situations, but it usually requires one of three things: a clear right to terminate, a landlord who agrees to release you, or a replacement tenant who removes or reduces the landlord's loss.
In practical terms, a no-penalty or low-penalty exit is most realistic where:
- the lease has a break clause and you comply with it,
- the landlord has seriously breached the lease and you follow the correct termination process,
- the landlord wants the premises back,
- you find a strong assignee who can take over quickly,
- the market is strong and the landlord can re-let at the same or higher rent, or
- the landlord accepts a surrender on favourable terms because it avoids uncertainty.
For many businesses, the realistic goal isn't zero cost. It's reducing the cost, capping the exposure and getting a clean release.
For example, rather than saying, "we are leaving next Friday", you might propose: "we'll keep paying rent until 30 June, complete make-good by 20 June, contribute $4,000 towards re-leasing costs, and release the bond once the surrender deed is signed." That gives the landlord something concrete to accept, reject or negotiate.
Also be careful with aggressive tactics. Stopping rent to force a discussion, removing fixtures early, changing locks or abandoning the premises can escalate the dispute. Commercial tenancy disputes can quickly become arguments about access and possession. If you're worried about exclusion from the premises, understand the legal position around landlord lockouts and get advice quickly.
Step-By-Step Checklist To Get Out Of A Business Or Office Lease
If you're wondering how to get out of a commercial lease, business lease or office lease, use this checklist before you speak to the landlord or send a termination notice.
- Find the full lease pack: collect the lease, disclosure statement if relevant, variations, renewal notices, incentive deed, bank guarantee, personal guarantee and any side letters.
- Confirm the lease status: check the start date, end date, option periods, whether you're holding over, and whether rent or outgoings are up to date.
- Identify the exit clauses: look for break rights, termination rights, assignment, subleasing, relocation, redevelopment, default and dispute resolution clauses.
- Check whether retail leasing laws apply: this can affect consent, disclosure, disputes and costs.
- Calculate the likely exposure: include rent, outgoings, make-good, incentives, re-leasing costs, legal costs, interest and any personal guarantee risk.
- Assess landlord issues: if you say the landlord is in breach, gather evidence such as emails, photos, repair requests, outage records and trading impact.
- Consider replacement options: decide whether assignment or subleasing is realistic and whether you can introduce a suitable incoming tenant.
- Prepare a practical proposal: put forward dates, payments, make-good steps and documents needed to finalise the exit.
- Document the final deal: use a surrender deed, deed of assignment, sublease or tailored termination letter so everyone is clear on the outcome.
Don't rely on a casual phone call or text message for something this important. If the lease is ending early, the final arrangement should be in writing and signed by the right parties.
What To Put In A Commercial Lease Termination Proposal
If you want the landlord to agree to an early exit, a clear written proposal is usually better than a vague request. A lawyer should tailor the document to your lease and your negotiating position, but a sensible outline often includes:
- Parties and premises: identify the tenant, landlord, guarantors if relevant, lease date and premises address.
- Reason for the request: explain the commercial reason briefly and calmly, without making unnecessary admissions.
- Proposed exit date: state the date you want the lease to end and when you'll hand back possession.
- Payments: set out rent, outgoings, any settlement amount, re-leasing contribution and when each amount will be paid.
- Make-good and handover: describe what you'll remove, repair or leave behind, and when keys and access devices will be returned.
- Bond, bank guarantee and security: say when the landlord must return or release security, subject to agreed deductions.
- Release wording: confirm whether the tenant and any guarantors will be released from future obligations after completion.
- Documents required: state that the deal should be recorded in a deed of surrender, deed of assignment or other formal document.
Keep the tone constructive. Landlords are usually more receptive when they can see a clear commercial path: when the space becomes available, what money is being offered, what condition the premises will be in and how future risk will be closed off.
Key Takeaways
- You can often get out of a commercial lease early, but usually only through the lease terms, a negotiated surrender, assignment, sublease, lawful termination or a natural end of term.
- Walking away without agreement can leave you exposed to rent, outgoings, make-good, re-leasing costs, legal costs and personal guarantee claims.
- Retail leasing laws may give extra protections or processes, but they differ across Australian states and territories.
- A no-penalty exit is most realistic where there's a break clause, serious landlord breach, strong replacement tenant or landlord agreement.
- Before negotiating, calculate your likely exposure and prepare a practical proposal with dates, payments, make-good and release terms.
- Document the final arrangement properly so there's no confusion about when the lease ends and what obligations survive.
If you'd like help with reviewing your lease, negotiating an early exit, preparing surrender or assignment documents, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.
Sapna Goundancontent writer
