Commercial Lease Termination & Surrender
Commercial lease termination is the legal ending of a lease before the natural expiry of its term, by agreement (surrender) or by default. We act for tenants and landlords on lease terminations across Australia.
Most commercial leases don’t have an automatic break right. Ending a lease early is usually a negotiated outcome, and the way it’s documented decides who pays for what, who keeps the security, and whether the parties can come back at each other later. Our commercial lease lawyers work through every available exit route. The Victorian Small Business Commission sets out the rules for ending a retail lease early in Victoria.
Routes out of a commercial lease
Mutual surrender
A negotiated end to the lease, documented in a deed of surrender. Both sides walk away on agreed terms, usually with the tenant paying a surrender fee or making the premises good.
See: Deed of Surrender
Assignment
The tenant transfers the lease to a third party (often a buyer of the business), removing themselves from future obligations on agreed terms.
See: Commercial Lease Assignment & Transfer
Sublease
The tenant subleases all or part of the premises to a third party. The head lease stays in place and the original tenant remains liable, but the sublease can offset the rent.
See: Sublease Agreements
Early termination clause
Some leases include a contractual break right (often only at fixed dates and on notice), or a break fee that lets the tenant exit on payment of a defined sum.
See: Early Termination & Break Fees
Default termination by the landlord
If a tenant breaches the lease and doesn’t fix it within the cure period, the landlord can terminate. Used carefully, this is a clean exit. Done badly, it exposes the landlord to a wrongful termination claim.
Repudiation and abandonment
If a tenant abandons the premises or makes clear they no longer intend to perform the lease, the landlord can accept the repudiation and terminate. The tenant remains liable for the loss, subject to the landlord’s duty to mitigate.
See: Abandonment & Repudiation
Frustration
Rare. A lease can be discharged by frustration if an event makes performance fundamentally impossible (for example, total destruction of the premises). Most commercial leases include damage and destruction clauses that handle this scenario contractually.
How a deed of surrender works
A deed of surrender records:
- The agreed end date
- Any payment by the tenant (surrender fee, contribution to make good, rent up to a specified date)
- The treatment of the bank guarantee or security deposit
- The tenant’s make good obligation (often released or capped in exchange for a payment)
- A mutual release of all claims under the lease
- Treatment of any incentive deed clawback
- Hand-back arrangements (keys, contents, abandoned goods)
A clean deed of surrender is usually the cheapest way out for both sides.
What an early exit costs
The cost depends on:
- How much of the term is left
- The landlord’s likely re-letting prospects
- The state of the premises and the make good obligation
- Any incentive deed clawback (most cash incentives include a pro-rata repayment if the tenant exits early)
- The bank guarantee on foot
- The value of the lease to a replacement tenant or assignee
In a hot market the landlord may release the tenant cheaply because they can re-let quickly. In a soft market they may demand a much larger surrender fee.
Risks of getting it wrong
For tenants
- Walking away without a deed: the lease keeps running and the tenant remains liable for years of rent
- Stopping rent payments: gives the landlord a clean breach to terminate and sue
- Forgetting the personal guarantee: even after assignment, the guarantor can stay on the hook
For landlords
- Acting on a defective breach notice: opens the landlord up to a wrongful termination claim and a relief against forfeiture application. Our lease disputes team handles these on both sides
- Failing to mitigate: the landlord has a duty to take reasonable steps to re-let, and any damages claim will be reduced if they don’t
- Re-entering when the relevant Act doesn’t allow it: can be unlawful and gives the tenant a strong claim
We work the process so neither side ends up here.
Frequently asked questions
Can I get out of my commercial lease early?
Usually only by negotiating a deed of surrender, assigning the lease, or subletting. Some leases have contractual break rights but they’re uncommon. We work through the cleanest available route.
What is a deed of surrender?
A short legal document that records the agreed end of the lease, any payment, the release of obligations, and the treatment of security. Both sides sign and walk away.
What if I just stop paying rent and hand the keys back?
The lease keeps running. The landlord can sue for the remaining rent (subject to mitigating by re-letting), call on the bank guarantee, and pursue any personal guarantor. This is the most expensive way to exit a lease.
Can the landlord refuse to surrender?
Yes, the landlord doesn’t have to agree. In a soft market they may have no real alternative; in a hot market they often will. Negotiation is about finding a number that works for both sides.
Can the landlord terminate for non-payment of rent?
Yes, after issuing a valid breach notice and giving the tenant the cure period set by the lease and the relevant Act. Acting too early or with a defective notice is risky.
What is relief against forfeiture?
A court application by a tenant to be reinstated under the lease after the landlord has terminated for breach. Available where the tenant has fixed (or can fix) the breach and the consequences of forfeiture would be disproportionate.
Will I get my bank guarantee back when the lease ends?
If the lease has been performed and the make good is done, yes. Disputes about return of the bank guarantee are common at the end of the term. We pursue or defend them.
How much does lease termination advice cost?
Fixed fee for surrender deeds and termination notices. Disputes are scoped in stages. Send us the lease and the situation and we’ll come back with a quote.
Talk to a lease termination and surrender lawyer
Whether you’re a tenant trying to exit or a landlord dealing with a defaulting tenant, the cleanest outcome usually comes from getting advice early.