When a commercial lease ends early, landlords and tenants need a clear, legally binding way to document the arrangement. This is where a Deed of Surrender comes in.
A Deed of Surrender formally records the agreement between landlord and tenant to end a lease before its expiry date. It protects both parties by setting out the termination date, financial settlement, and release of obligations, ensuring there’s no uncertainty once the lease has ended.
This guide, by our commercial leasing lawyers, explains what a Deed of Surrender is, when it’s used, what it should contain, and how it differs from simply “walking away” from a lease.
Key Takeaways
A Deed of Surrender is a formal legal document that ends a commercial lease early by mutual agreement.
It provides certainty about the termination date, compensation, make-good works, and release of liability.
Without a deed, both landlord and tenant may remain exposed to ongoing obligations or disputes.
The deed must be properly drafted and executed to be legally effective.
Both parties should obtain independent legal advice before signing.
What Is a Deed of Surrender?
A Deed of Surrender is a written agreement that brings a commercial lease to an end before its contractual expiry date.
Under a Deed of Surrender, both landlord and tenant agree that the lease will end early and that neither will make further claims beyond what is set out in the deed. Unlike termination for breach, which can occur unilaterally, a surrender happens by mutual consent.
It is executed as a “deed” (not just a simple contract) because:
It confirms the intention to be legally bound, and
It can take effect immediately without needing financial consideration.
The deed is typically used when:
The tenant wants to vacate early (e.g. downsizing, relocation, or closure).
The landlord wants vacant possession (e.g. redevelopment, re-leasing, or refurbishment).
Both parties prefer a clean, negotiated exit rather than a dispute.
For a full overview of the steps landlords should take when a lease ends early, see our guide: Ending a Commercial Lease Early: A Landlord’s Guide.
Tenants, in turn, may find it helpful to review Ending a Commercial Lease Early: A Tenant’s Guide for practical strategies and key considerations before negotiating a surrender.
Why a Deed of Surrender Matters
Ending a lease informally (for example, by exchanging emails or verbal consent) can create future risks.
Without a deed:
Rent and outgoings may still technically accrue.
Make-good disputes can arise later.
There may be ambiguity over handover, keys, or bond release.
Neither party has clear evidence that the lease has ended.
A properly drafted Deed of Surrender avoids these problems by confirming exactly how and when the lease ends, and what happens to any financial or physical obligations.
Typical Clauses in a Deed of Surrender
While each deed is tailored to the circumstances, a standard commercial Deed of Surrender should include the following key elements:
1. Parties and Property Details
Identifies the landlord, tenant, guarantors (if any), and the leased premises.
2. Surrender Date
Specifies the exact date and time when the lease ends and the tenant vacates the premises.
3. Compensation or Settlement Amount
Outlines any payment made by the tenant to the landlord to cover:
Unpaid rent or outgoings,
Make-good obligations, and
Re-letting or legal costs.
To understand how inducements like rent-free periods or fit-out contributions may need to be considered in a surrender, see our guide on Lease Incentives in Commercial Leases
4. Make-Good and Condition of Premises
Details the agreed condition at handover – including works completed, inspection arrangements, and any retention from the bond to cover costs.
5. Return of Security Bond or Bank Guarantee
Sets out whether the landlord will draw on the bond or guarantee, and how any remaining balance will be returned.
6. Release of Liability
States that both parties are released from future claims relating to the lease, except for obligations expressly included in the deed.
7. GST and Tax Allocation
Clarifies whether payments under the deed are inclusive or exclusive of GST, and how tax invoices will be handled.
8. Confidentiality and Non-Disparagement
Prevents either party from disclosing the terms of the settlement or making damaging statements.
9. Execution as a Deed
The document must be executed correctly (signed, witnessed (where required), and dated) for it to be legally binding.
Real-Life Example
A technology company leased an office in Brisbane for five years but needed to relocate after two. Rather than breach the lease, the tenant negotiated a Deed of Surrender, paying three months’ rent in compensation and completing make-good works.
The landlord recovered costs promptly and re-let the space within weeks, both parties avoided litigation and maintained a positive business relationship.
Common Mistakes to Avoid in a Deed of Release
Even with the best intentions, errors in preparing or finalising a Deed of Surrender can create ongoing liability or disputes. To ensure the agreement is legally effective and commercially sound, watch out for these common mistakes to avoid:
- Relying on informal agreements: Verbal consent or email exchanges are not sufficient.
- Failing to address make-good obligations: Omitting them can leave landlords with unexpected repair bills.
- Incorrect execution: A deed must be signed in accordance with legislative requirements.
- No release clause: Without it, either party could pursue claims later.
- Unclear GST treatment: Ambiguity can cause compliance issues.
Checklist: What to Include in a Deed of Surrender
Before finalising any lease termination, review this Deed of Surrender checklist to confirm your agreement covers every critical detail, from payment terms to make-good and release clauses:
- Surrender date and termination details.
- Financial settlement and payment timing.
- Confirmation of make-good completion.
- Bond or guarantee treatment.
- Release of liability clauses.
- Confidentiality and non-disparagement provisions.
- GST clause and tax compliance statement.
- Proper signatures and witnessing.
Frequently Asked Questions
Is a Deed of Surrender legally required to end a lease early?
While not always mandatory, it is the safest and most recognised way to formally end a lease by mutual agreement. Without it, obligations can remain uncertain.
How is a Deed of Surrender different from a Notice of Termination?
A Notice of Termination is used when a lease ends due to breach, often unilaterally. A Deed of Surrender is a mutual, negotiated agreement to end the lease.
Do both landlord and tenant need legal advice?
Yes. Each party should obtain independent advice to ensure their interests are protected and that the deed reflects the agreed terms.
For Australian businesses, obtaining professional legal advice from a commercial lease lawyer is the best way to ensure the deed is valid, compliant, and aligned with your objectives.
What happens to the security bond or bank guarantee?
The landlord may retain part or all of the security to cover verified losses. Any balance must be returned after all obligations are met.
Can a Deed of Surrender include confidentiality?
Yes. Many commercial deeds include confidentiality and non-disparagement clauses, especially where compensation or sensitive terms are involved.
A Deed of Surrender provides certainty, fairness, and closure when a commercial lease ends early. It ensures both landlord and tenant understand their rights and responsibilities, avoiding future disputes and protecting commercial relationships.
