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Leasing commercial premises is a foundational step for almost every Australian business, whether you’re launching a retail store, operating a café, or running an office. But from time to time, you might find yourself occupying a business location without any written lease agreement in place. Maybe you’ve taken over a space from a previous business, or reached a quick handshake deal to “sort out the paperwork later.”
This is an easier trap to fall into than many business owners realise. However, operating with no lease agreement brings significant risks for both tenants and landlords, and understanding your rights, obligations, and what can go wrong is crucial. The good news? With a clear plan and the right legal advice, you can avoid major pitfalls and secure your premises – no matter where you’re starting from.
In this article, we’ll break down what can happen if you have no lease agreement, what legal protections exist, how eviction works without a formal rental agreement (including in WA), and the steps to safeguard your business moving forward. Let’s explore how to navigate commercial leasing the right way in Australia.
What Does ‘No Lease Agreement’ Really Mean?
Every business needs to occupy its premises on a legal basis, and in Australia, this is typically done through a written lease (sometimes called a commercial or retail lease). But what if there’s no lease agreement at all?
This scenario can arise when:
- The original written lease has expired, and the landlord allows you to stay (“hold over”).
- You move in before the final paperwork is completed, relying on informal discussions or emails.
- You take over a space on a handshake deal, assuming “everyone is on the same page”.
Without a written document, your arrangement defaults to what’s called a “common law lease” or periodic tenancy – in other words, your rights come from general property law, not a contract tailored to suit you. This can leave both parties dangerously exposed.
Is a Verbal Lease or Handshake Deal Legally Binding?
Under Australian law, even an unwritten lease can sometimes be enforceable – but only for short periods and with far less certainty. Verbal agreements are notoriously hard to prove in court, and you’ll struggle to enforce any specific terms (like an option to renew, responsibility for fitout, or notice periods) unless they’re in writing.
For business owners, relying solely on a handshake or verbal “no lease agreement” is risky and should be a temporary measure at best. If you’re in any doubt about your tenancy arrangement, speak with a lawyer about your situation before problems arise.
What Happens If My Business Has No Lease Agreement?
Not having a written lease can create a range of problems for both tenants and landlords. Here’s what you need to consider if you’re running your business without a proper commercial lease agreement:
- Uncertainty About Key Terms: Without a written lease, crucial details (like rent increases, outgoings, renewal options, repair responsibilities, access hours, or what happens if the premises sell) are undefined, leaving both sides open to dispute.
- Difficulties in Enforcing Rights: If a dispute arises – over repairs, rent, signage, or outgoings – it’s extremely hard to enforce any terms not set out in writing. Who’s responsible for what? With no agreement, it’s down to arguing about what was ‘agreed’, often without evidence.
- Greater Risk of Eviction: Landlords can generally remove a tenant without a lease agreement on relatively short notice (see below for details). Your business could be disrupted or forced to vacate unexpectedly, causing commercial loss and reputational damage.
- Access to Business Financing: Many banks and investors insist on seeing a formal lease before lending money to a business. No written agreement = much harder to secure finance based on your premises.
- No Clear Process for Ending the Tenancy: Without set notice periods or exit processes, tenants and landlords may misunderstand their obligations, leading to costly and stressful disputes.
- Risk of Unintentional ‘Franchising’: Sometimes, informal business arrangements without a clear written lease or agreement can be challenged as an “accidental franchise”, which creates unexpected legal obligations under the Franchising Code of Conduct.
Simply put, operating without a formal lease turns your business’s foundation into quicksand. Even if everything seems fine now, when relationships sour or circumstances change, the cracks can appear rapidly.
No Lease Agreement – What Are My Rights? (Tenant & Landlord)
If you’re a tenant running your business with no lease agreement, your rights will depend on the type of arrangement in place and what is considered ‘reasonable’ under Australian law. In general, you may be treated as a ‘periodic tenant’ (for example, a month-to-month tenancy), which has very different protections to a tenant under a fixed-term written lease.
Tenant Rights Without a Lease
- Basic Right to Occupy: If you’re paying rent and the arrangement is accepted by the landlord, you have the right to occupy the premises for as long as the rental payments are accepted. However, this is often a ‘periodic’ right – meaning little or no notice might be required for you to leave.
- No Guaranteed Security of Tenure: Unlike a formal lease, you don’t have security beyond each rental period (usually weekly or monthly). The landlord can often give written notice to quit (sometimes 14 or 30 days) at any time, depending on state law and the nature of your tenancy.
- Limited Legal Protections: You’re still covered by parts of Australian consumer law (such as protections against misleading conduct) and general property law, but you lack the specific safeguards many leases contain. For instance, there’s usually no right to renew, exclude competitors, or make improvements without risk.
Landlord Rights Without a Lease
- Greater Power to Vacate Premises: With no written agreement, a landlord can typically terminate the tenancy with appropriate (often minimal) notice. They must still follow correct legal procedures though.
- Freedom to Set or Change Conditions: Terms such as rent increases or use of premises are much less restricted, though landlords must still act “reasonably” and in line with relevant property law.
- Potential for Disputes: Lack of clarity can expose the landlord to disputes over damage, arrears, or what was agreed, and make enforcing payment or regaining possession harder if a tenant refuses to leave.
In both cases, disputes often end in mediation or court, costing time and money. If in doubt, clarifying your arrangement with a commercial lease lawyer as soon as possible is the best way to protect your rights.
How To Evict a Tenant Without Rental Agreement (WA and Nationwide)
One of the most common (and stressful) questions landlords and tenants face in these scenarios is: “How do you evict a tenant with no lease agreement?” This applies whether you’re in Western Australia (WA) or elsewhere, but the process and requirements may vary by state and the type of property (commercial or residential).
For commercial premises, if there’s no formal lease, the arrangement is generally governed by the common law of tenancies (as modified by local Acts) rather than retail tenancy law. Here’s how it typically works:
- Step 1: Identify the Type of Tenancy
Determine whether there is a periodic arrangement (weekly, monthly) or simply an informal “at will” agreement. The more structure to the arrangement (such as rent paid monthly and receipts issued), the more likely it’s a periodic tenancy. - Step 2: Give Written Notice
Most jurisdictions require “reasonable notice” to vacate – in practice, this could be 7, 14, or 30 days, depending on the payment cycle and local legislation. For example, in WA, monthly tenants are usually entitled to at least one month’s notice. (Always check the specifics with a WA property lawyer or refer to relevant legislation). - Step 3: Follow Due Process
If the tenant fails to vacate after proper notice, the landlord may need to apply for a court or tribunal order to regain possession. Self-help “changing the locks” is not allowed except in very limited circumstances. - Step 4: Resolve Disputes
If a dispute arises, mediation or formal dispute resolution may be required. It’s wise to explore alternative dispute resolution before escalating to court, as this can reduce costs for all parties.
For tenants, it’s important to remember that without a fixed-term lease, you have little protection against eviction if the landlord follows the correct procedure.
What Is a Common Law Lease and Does It Offer Any Protection?
“Common law lease” is a term often used to describe tenancy arrangements that aren’t covered by a written agreement or specific legislation. Instead, they rely on basic property law and any established custom or practice between the tenant and landlord.
In Australia, a common law lease may arise if there’s an unwritten agreement about rent, use, and possession. While this can give you a basic right to occupy, you’ll miss out on many of the significant protections provided by state-based leasing laws (such as security of tenure and clear notice requirements).
This means you can still be subject to eviction (often on short notice), sudden rent increases, or conflicting claims about what the arrangement “was meant to be.” More importantly – from a business owner’s perspective – you have no documented agreement to show banks, customers, or potential buyers of your business.
Do I Have to Accept a ‘No Lease’ Situation?
If you’re just starting a business or taking over a new location, it can be tempting to settle into trading quickly without waiting for a lease to be signed. However, this exposes your business to serious risks.
Instead, always ensure you have at least a draft lease or heads of agreement that sets out the basic terms – and push for a proper commercial lease agreement as soon as possible. If you inherit an informal lease from a prior tenant, try to formalise your arrangement with the landlord, or consider negotiating a new assignment or document.
Remember, an “agreement to agree later” is unenforceable: unless you have the essentials of rent, term, and property written down and signed, you’re at the mercy of property law’s minimum protections only.
What Legal Documents Do I Need When Leasing Commercial Premises?
Whether you’re signing your first lease or trying to formalise an existing floating arrangement, the right legal documents make all the difference in securing your business’s home turf. Here’s what most business owners need:
- Commercial Lease Agreement: Sets out key terms, rights, and obligations between you and the landlord, including rent, duration, responsibilities, fitout, options to renew, and exit procedures.
- Deed of Assignment of Lease: Used if you’re taking over an existing lease from a previous tenant. This document ensures you inherit the same terms and obligations legally.
- Property Licence Agreement: Sometimes used for shared workspaces or arrangements shorter than typical leases, offering legal clarity for both sides.
- Heads of Agreement: A short summary of major terms that both parties intend to formalise in a full lease. Not usually binding, but useful as an interim document until a formal lease is signed.
- Deed of Waiver, Release & Indemnity: Protects both parties if you negotiate a surrender (early end) of an informal lease and want to make sure there are no lingering disputes.
Each situation is different – the ideal document depends on whether you’re a tenant, landlord, starting anew, or taking over from someone else. The key is to avoid flying blind: make sure legal experts review or draft these documents to protect your interests from day one.
Other Legal Considerations for Businesses Leasing Without a Written Agreement
Leasing is just one part of your business’s legal landscape. If you’re running a business, especially from rented or licensed premises, consider these areas as well:
- Business Structure and Registration: Decide whether you’ll operate as a sole trader, partnership, or company for better liability protection and growth potential. Get an ABN and register your business name if required.
- Compliance With Australian Consumer Law (ACL): The ACL covers your conduct with customers, advertising, and refund policies – mandatory, even if your main legal worry is leasing.
- Employment Law and Contracts: If you hire staff, make sure you put solid employment contracts and workplace policies in place to comply with Fair Work and avoid disputes.
- Intellectual Property: Register your trade marks early and ensure your business’s brand, logo, and concept are protected – even before you sign a commercial lease.
- Privacy & Data Protection: If you’re collecting customer data (in-store or online), you’ll need a Privacy Policy that complies with the Privacy Act. This builds trust and keeps you on the right side of the law.
Getting these legal ducks in a row is vital. It’s especially important if you have no written lease, as it’s all the more crucial to ensure the other parts of your business are secure.
Can You Start Trading Without a Lease? What’s the Risk?
It’s not illegal to begin trading without a formal lease – and sometimes, commercial realities mean you need to open quickly to meet customer demand, even if the paperwork isn’t finished. However, doing so makes you very vulnerable if things turn sour. You risk:
- Sudden eviction or business interruption
- Disputes over unpaid rent, repairs, or fitout
- Difficulty accessing finance or selling your business down the track
- Tying up company resources in costly legal disputes
If you absolutely must begin trading before the written lease is signed, make sure you at least agree on (and document) the essentials: rent, term, notice required to vacate, and who pays for major outgoings or repairs.
And remember: even a short term, professionally-prepared agreement is always better than nothing.
Key Takeaways: Protecting Your Business Where There’s No Lease Agreement
- Running a business from commercial premises with no lease agreement exposes your business to major legal and financial risk.
- Your rights and protections are minimal under property law and can leave you open to short-notice eviction, sudden rent changes, and enforcement headaches.
- Resolving disputes is harder, and you’ll battle to prove what was ‘agreed’ if it’s not in writing.
- Landlords may have some extra flexibility but also greater exposure to costly disputes and difficulties regaining possession if things go wrong.
- Formalise your arrangement as soon as possible with a proper commercial lease agreement or similar document reviewed by legal experts.
- Getting the right supporting legal agreements – employment contracts, Privacy Policy, business structure, and IP protection – sets your whole business up for long-term security and growth.
If you would like a consultation on securing your business premises or formalising your lease arrangement, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.
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