Sometimes a business’s circumstances change. You might need to downsize, relocate, or close your operations altogether. But walking away from a commercial lease before its end date can expose you to legal and financial risk.
This guide for tenants and lessees, by our commercial lease lawyer explains your options, rights, and responsibilities as a tenant, along with practical steps to minimise costs and avoid disputes.
If you’re a landlord or lessor, read our landlord guide to ending a commercial lease early.
Key Takeaways
You cannot freely vacate a leased premises without the landlord’s consent or a contractual right to do so.
Common options for ending a lease early include negotiating a surrender, exercising a break clause, or assigning/subletting the premises.
Tenants may remain liable for rent and other obligations until the landlord re-lets the property.
Always consider make-good requirements, lease incentives, and outstanding outgoings before finalising an early exit.
A properly drafted Deed of Surrender is the safest way to document early lease termination.
Legal Options for Tenants
1. Negotiate a Deed of Surrender
The most common and practical option for tenants is to negotiate a Deed of Surrender with the landlord.
This involves agreeing on:
A termination date;
Compensation (e.g. several months’ rent or payment for make-good); and
Mutual release of obligations through a Deed of Surrender.
This formal agreement ensures that both parties are protected and that you are released from future liabilities.
2. Exercise a Break Clause
Some leases include a break clause allowing early termination under specific conditions, such as after a certain date or with written notice.
To exercise this clause:
Check notice periods and ensure your notice is properly served.
Confirm you are not in breach of the lease at the time.
Ensure all rent and outgoings are paid up to the break date.
Failure to follow the correct procedure could invalidate the termination, leaving you liable for ongoing rent.
3. Assignment or Subletting
If your landlord doesn’t agree to an early surrender, you might assign the lease (transfer it to another business) or sublet the premises.
This can help reduce financial pressure while fulfilling your obligations.
Assignments or subleases usually require:
Landlord consent (which cannot be unreasonably withheld);
A replacement tenant with acceptable financial standing; and
Payment of the landlord’s reasonable legal and administrative costs.
4. Termination for Landlord Breach
If the landlord fails to meet significant obligations (for example, by restricting access, neglecting repairs, or breaching quiet enjoyment) you may be able to terminate the lease for breach.
However, this is a serious step and should only be taken after obtaining legal advice, as wrongful termination can expose you to damages.
Thinking about ending your lease early? Our commercial leasing lawyers can explain your options and help you negotiate a fair exit.
Financial Considerations for Tenants
Ending a commercial lease early often comes with costs. Common financial factors include:
Outstanding rent and outgoings until the landlord re-lets the property.
Make-good obligations (returning the premises to its original condition).
Repayment of lease incentives (such as rent-free periods or fit-out contributions).
Landlord’s legal fees related to the surrender or re-letting.
For more on incentives, see: Lease Incentives in Commercial Leases
Make-Good Obligations
Before you vacate, review the make-good clause in your lease. You may need to:
Remove partitions, signage, or fit-outs.
Repaint and repair walls or floors.
Disconnect utilities and reinstate the premises to its original state.
Failing to complete make-good work can lead to the landlord deducting costs from your bond or seeking recovery after you vacate.
For detailed guidance, see our article on Make Good Obligations in Commercial Leases Explained.
The Role of the Security Bond or Bank Guarantee
Landlords often hold a bond or bank guarantee to secure your obligations. When ending the lease early:
Expect the landlord to draw on it to cover unpaid rent, make-good, or damages.
Request an itemised summary of deductions.
Once all verified costs are met, the balance should be returned to you.
Tenant Insolvency or Financial Hardship
If your business is under financial strain, early discussion with the landlord is vital. In some cases, you may negotiate:
Temporary rent relief or payment plans,
A shorter lease term, or
A formal surrender to avoid litigation.
Engaging a commercial leasing lawyer early can help you manage this process and protect your business reputation.
Real-Life Example
A small design studio in Melbourne leased a creative space for five years but faced declining revenue after two. The tenant approached the landlord to surrender the lease early.
Through legal advice, they negotiated a Deed of Surrender, agreeing to pay two months’ rent and complete make-good works. The landlord accepted the proposal, and the lease ended amicably – saving both parties significant time and cost.
Legal Takeaway: Don’t risk breaching your lease. Get legal guidance to make sure your early termination is compliant and cost-effective.
Checklist for Tenants Ending a Lease Early
Before taking any steps to end your lease, it’s important to plan carefully and follow each stage in the right order. Use this tenant checklist for ending a commercial lease early to stay organised and ensure you meet all legal and financial requirements:
- Review your lease for break clauses or surrender provisions.
- Assess make-good and incentive repayment obligations.
- Seek legal advice before contacting the landlord.
- Prepare a clear surrender proposal (include dates, payments, and make-good).
- Serve all notices in writing and within required timeframes.
- Complete make-good and vacate on the agreed date.
- Ensure the Deed of Surrender is signed and stored securely.
- Obtain confirmation of bond return or deduction.
Every lease is different – and so are your options. Prosper Law can review your lease and guide you through the process step-by-step.
Frequently Asked Questions
Can I end my lease early without the landlord’s consent?
Generally, no. Unless your lease allows for early termination or the landlord agrees, leaving early may constitute breach of contract.
What if I find another tenant to take over my lease?
You may assign or sublet your lease, but landlord consent is typically required. You may remain liable if the new tenant defaults.
Do I still have to pay make-good costs if the landlord accepts early termination?
Yes. Unless otherwise negotiated in the Deed of Surrender.
Legal Tip: Always clarify this before signing.
Can I negotiate to reduce my financial liability?
Possibly. Many landlords will consider a reasonable surrender offer to avoid delay or vacancy losses.
Should I get legal advice before ending my lease?
Absolutely. Ending a lease early involves significant legal and financial implications. An experienced commercial leasing lawyer can help you negotiate, prepare documents, and avoid breach.
For professional help with lease surrenders, negotiations, or legal documentation, contact Prosper Law – we provide clear, practical advice for Australian tenants navigating early lease termination.
