Contents
Entering into a rental agreement can be an exciting step – whether you’re setting up shop for your small business, expanding to a new location, or renting commercial premises for the first time. But it’s also a major legal and financial commitment. Many business owners wonder whether there’s a “cooling-off period” after signing a lease – essentially, a window of time where you can change your mind without penalty. This is a common question in Australia, and the answer is important for anyone looking to secure a new rental property or business premises.
In this guide, we’ll walk you through what a rental agreement cooling off period actually means, whether it applies to leases in Australia, and what options are available if you need to withdraw from a signed rental contract. We’ll also cover key legal considerations, best practice steps, and the documents you should have when negotiating or entering into a rental agreement. If you’re concerned about getting trapped in the wrong lease or want to understand your risks and rights, keep reading – we’ll help you get it right from day one.
What Is a Cooling-Off Period in Rental Agreements?
A “cooling-off period” is a legal right that allows someone to cancel a contract within a short period after signing – usually a few business days – without penalty and often without having to give a reason. Cooling-off periods are designed to protect people from high-pressure sales tactics, rapid decisions, or contracts they later regret. You’ll often hear about them in the context of buying a property, certain types of consumer contracts, or major purchases such as cars. But do they relate to rental agreements – especially leases for commercial premises?
Residential vs Commercial Rental Agreement Cooling-Off
In Australia, cooling-off periods are much more common in residential transactions – like property sales or specific door-to-door sales – than in commercial agreements. The rules for rental agreement cooling off period protection are set by law and vary by the type of contract and the state or territory you’re in.
- Residential Leases: In most states and territories, there is no statutory cooling-off period when you sign a standard residential lease or fixed-term tenancy agreement. Once the agreement is signed, it’s legally binding, with only limited ways to withdraw.
- Commercial Leases: Generally, there is no automatic cooling-off period for commercial leases in Australia. Once you (or your business) signs, you are contractually bound to the lease terms.
Always check your specific state or territory’s laws, or speak with a legal expert to be sure of your rights in your particular situation.
Is There a Cooling-Off Period for Commercial Leases?
For most Australian businesses entering into a commercial lease, the short answer is no: there isn’t a cooling-off period. As soon as both parties sign the lease (and usually once any conditions are met, such as landlord approval or receipt of a deposit), you are bound to its terms and obligations. This means if you change your mind after signing – no matter how quickly – you cannot simply walk away without serious consequences.
Why Isn’t There a Cooling-Off Period?
Commercial leases are considered business-to-business contracts, and the law expects both parties (landlords and tenants) to have conducted their due diligence and negotiated terms before signing. Unlike residential tenants, who are seen as needing extra protections, business tenants are expected to act carefully and even seek professional advice before committing. For more on the differences between business structures and obligations, see our guide to legal requirements for starting a business.
Exceptions: Are There Ever Rental Agreement Cooling Off Periods?
There are limited circumstances where a lease or rental agreement might include a cooling-off period:
- Expressly Written Into the Lease: If you or your lawyer negotiate a cooling-off period directly into the written rental agreement and both parties sign it, then you have this right – but it is very uncommon (most landlords will not agree to this).
- Conditional Leases/Agreements for Lease: Sometimes, a preliminary “agreement for lease” or “heads of agreement” can be subject to conditions (such as finance, council approval, or final lease approval) that must be met before the lease formally begins. If the conditions are not satisfied, the agreement may allow for exit without penalty. But this is not a general cooling-off right, and the details are always set out in the contract.
If you think you need a cooling-off period, speak to your legal advisors before signing anything. Consider negotiating for this expressly during the lease negotiation phase, but don’t assume you’ll get it – landlords rarely agree unless there’s a strong commercial reason.
What Happens If I Change My Mind After Signing a Lease?
If you’ve signed a rental agreement or commercial lease and have second thoughts, your options are usually limited. Here’s what you need to know:
- Legally Binding Immediately: Once signed, you’re bound by the terms – unless the agreement contains an explicit early termination or cooling-off clause.
- Negotiating With the Landlord: You can always discuss with your landlord or property agent to see if they’ll release you without penalty – perhaps they have other prospective tenants. However, they’re under no obligation to do so unless your contract specifically allows it.
- Early Termination Clauses: Some leases have break clauses, allowing you to end the lease early if you pay a fee or meet certain requirements. Review your lease for any such provisions.
- Assignment or Subletting: Depending on the lease terms, you may be able to assign your lease (transfer it to another business) or sublet the premises. This does not release you from obligations unless the landlord agrees, but it could help minimise losses. You can read more in our guide on subletting options for businesses.
- Breach of Contract: Walking away without proper termination can result in hefty damages – often the full rent for the remainder of the term, plus legal costs and any other losses the landlord suffers.
For more practical guidance on how to handle leasing issues, review our article on breaking a commercial lease agreement.
What About Residential Tenancy Cooling-Off in Australia?
If you’re looking for a cooling-off period for a residential tenancy (as opposed to a business lease), the rules remain largely the same. Across most Australian states and territories, once a residential lease is signed, it is immediately binding. There is no standard cooling-off period except in certain off-the-plan property purchases, real estate sales, or under specific “unsolicited consumer agreement” scenarios, which typically do not apply to tenancies.
If you are moving into business premises that double as residential space (for example, a shopfront with a caretaker’s apartment), be aware the commercial lease regime will almost always apply – so expect no rental agreement cooling off period in that context either.
How Can I Protect Myself Before Signing a Rental Agreement?
Given the lack of automatic cooling-off for most leases, it’s important to take precautions before putting pen to paper. Here are some steps to protect your business:
- Review the Lease Thoroughly: Read every clause. Pay special attention to terms on rent, term, rent increases, outgoings, repairs, early termination, assignment, and dispute resolution. If anything is unclear or seems unfair, ask for clarification or seek legal advice.
- Negotiate for Key Protections: If you need flexibility (for example, you’re a start-up or have uncertain cashflow), try to negotiate with the landlord for break clauses, assignment rights, or even a short initial term with option periods.
- Get Professional Advice: Speak with a commercial leasing lawyer before signing anything. A legal expert can identify unfair contract terms, ensure the lease complies with local laws (such as the NSW Retail Leases Act), and negotiate terms that protect your interests. Sprintlaw regularly assists business owners by reviewing leases and advising on compliance. Read more about how we can help on our commercial lease lawyer service page.
- Understand Your Exit Options: Before you sign, clarify under what conditions you can end the lease, assign it, or sublet the premises – and ensure these are spelled out in writing.
- Avoid Relying on Verbal Promises: Only written terms in the signed contract are enforceable. Don’t assume that any assurance given in conversation – like “don’t worry, you can change your mind” – will protect you.
It’s always better to take a little extra time upfront than to be locked into an expensive, inflexible lease that doesn’t suit your business needs.
What Legal Documents and Support Should I Have?
Navigating a rental agreement is more than just finding a space and paying a deposit. Having the right legal paperwork in place can protect your business and give you options if plans change. Here are some key documents and supports to consider:
- Commercial Lease Agreement: The formal contract setting the terms of your tenancy – crucial for clarifying rent, term, and your obligations. See more on getting a commercial tenancy agreement drafted or reviewed.
- Heads of Agreement: A non-binding summary of the main commercial terms, used before the formal lease is signed. This document can set out key conditions (like finance approval) but is not a replacement for a full lease. Learn about Heads of Agreement here.
- Agreement for Lease: Used when certain conditions must be satisfied before a lease can formally commence, such as completion of fit-out or council approval.
- Deed of Assignment or Sublease: If you plan to transfer your lease to someone else down the track, you’ll need this. Check out our guide on assigning a lease in Australia.
- Legal Review Checklist: A legal expert can run a checklist of key risks and protections, helping you avoid the most common (and costly) mistakes.
- Retail Lease Disclosure Statement: In some states (such as NSW and Victoria), landlords are required by law to provide a disclosure statement before you sign a retail lease. This document spells out the key terms and occupier costs in plain English.
If you’re unsure which legal documents are right for your situation, book a chat with our commercial leasing lawyers for tailored advice and support.
What Other Legal and Regulatory Issues Should I Consider?
Signing a rental agreement touches on several key areas of law beyond your lease itself. Be aware of the following:
- Australian Consumer Law (ACL): If your lease relates to a retail business, your rights and obligations may be impacted by the ACL, particularly around unfair contract terms and misleading or deceptive conduct. Learn about your Australian Consumer Law obligations.
- Retail Tenancy Legislation: Most states and territories have specific retail leases legislation, which introduces extra protections for retail tenants (including requirements for disclosure statements, outgoings, and dispute resolution). Check the laws relevant for your location or sector.
- Local Council and Zoning: Not every property can be used for every type of business. Check with your local council for zoning approvals and required business licences. Operating in breach of zoning laws can lead to fines or business closure.
- Business Structure and Registrations: Ensure your business is set up properly before signing any lease. That means registering your ABN, choosing a structure (sole trader, company, trust, etc.), and having your business name registered if required.
- Insurance: Most commercial leases require the tenant to hold certain types of insurance (public liability, glass, contents). Make sure you factor this into your costs and compliance requirements.
Setting up a business is about more than just signing on the dotted line. Taking the time to understand these legal areas can save you a lot of pain – and cost – down the track.
Can I Add a Cooling-Off Period to My Lease?
If you know you’re going to need time to finalise your decision, or your circumstances could change rapidly, you might try to negotiate a cooling-off period or conditional clause directly into your lease agreement. This is possible, but rare in practice.
Here are a few tips if you want to try this approach:
- Propose Reasonable Conditions: Ask for a short cooling-off period or a clause allowing you to withdraw if a certain event occurs (for example, if your DA or finance approval isn’t granted within a set time frame).
- Make It Mutually Agreeable: Landlords are more likely to agree if the terms are fair and if their out-of-pocket losses are minimised.
- Get It In Writing: Any such term must be expressed clearly in the signed contract – don’t rely on a handshake or email assurance.
- Consider “Agreement for Lease” Staging: Instead of jumping straight into a long-term commitment, start with an agreement for lease that is subject to the satisfaction of certain conditions.
Ultimately, every landlord is different, and the market can influence your negotiating power. Work with a legal advisor to tailor your approach and decide if this strategy is appropriate for your business.
Key Takeaways
- There is typically no automatic cooling-off period for commercial or residential rental agreements in Australia – once signed, you’re bound by the lease terms.
- Exceptions exist only if a cooling-off period or other early termination right is expressly written into your contract – so it’s important to negotiate if you need flexibility.
- Read your lease carefully and seek legal advice before signing to ensure you understand your obligations, risks, and any available exit options.
- Be proactive – explore whether break clauses, assignment rights, or short initial terms might provide the flexibility your business needs.
- Never rely on verbal promises; only written lease terms are enforceable. Any special rights must be in the contract itself.
- Having the right legal documents – such as a thorough lease agreement and, if possible, a disclosure statement – can protect your business and help you avoid expensive mistakes.
- If you’re unsure or need advice, consult with a qualified commercial leasing lawyer – early advice can save significant headaches later on.
If you would like a consultation on your rental agreement or to discuss a rental agreement cooling off period for your new business premises, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.
Meet some of our Consumer Law Lawyers
Get in touch now!
We'll get back to you within 1 business day.
Book in a free consultation with us to discuss your legal needs.