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Landlords usually enter into a lease intending to see it through until the end. However, sometimes situations arise where your landlord may have the right to terminate your lease agreement. This most commonly occurs because you have breached a provision of your lease, such as failing to pay rent. They can also terminate your lease under other circumstances, including where they wish to demolish the building or relocate you to a new premises. As a tenant, you should be aware of your rights so that you can avoid eviction. This article explains how your landlord can terminate your lease and outlines several ways that you can protect yourself. 

Termination for Breach

A lease will almost always include a clause that allows the landlord to terminate the lease if you breach your agreement. 

For example, your landlord will likely have a right to terminate the lease if you do not pay your rent by the due date or fail to maintain the premises you are leasing. 

You should always review the lease to see what your landlord’s rights are. Make sure that your landlord needs to give you notice of the breach and an opportunity to rectify it before they can terminate the agreement. 

For example, it is probably a breach to not pay your rent by the due date. However, the lease may prevent your landlord from terminating the agreement until your rent is more than 14 days late. To terminate a lease because of a breach of your agreement, your landlord must follow the provisions of the lease and the relevant laws. In Australia, there is different legislation in each state and different rules for both retail and commercial premises.

Termination for Demolition

Many leases contain a demolition clause. This is a provision that allows your landlord to terminate your lease early if they decide to demolish the building containing your premises. 

If you have a retail lease, your landlord will need to comply with the requirements of the relevant legislation in your state. Usually, your landlord must genuinely plan and intend to demolish the building which houses the rental premises. To show that a proposal is genuine, the landlord could provide: 

  • a copy of their contract with the demolition company;
  • quotes;
  • plans and specifications;
  • building permits; or 
  • marketing material.

For retail leases in NSW, your landlord must provide you with at least six months written notice that they intend to demolish the building. After providing you with such notice, you may terminate the lease at any time with seven days notice in writing. 

Your landlord may only terminate the lease based on a demolition clause if it is not possible for the proposed demolition of the building to take place unless you vacate the premises. Then, the demolition must occur within a reasonably practicable time after your landlord terminates the lease.

Most tenants are not entitled to compensation for termination for demolition. However, there is an exception if you have contributed financially to fit out or refurbish the premises. In this situation, your landlord has an obligation to repay your fit out costs.

Importantly, this exception only applies in NSW, Queensland and Victoria. Other than this, a landlord does not need to provide compensation for moving costs, loss of income, fitting out new premises or any difference in rent.

Termination for Refurbishment or Relocation

If a landlord is planning to carry out repairs, refurbishment, redevelopment or extensions to the premises, they may be able to terminate your lease early. Again, a landlord must only invoke this clause if they genuinely intend to renovate and refurbish. Further, if the lease is governed by retail leasing legislation, they must comply with the relevant law.

Your landlord may also terminate the lease early if they intend to relocate your premises. If you are a retail tenant, you are entitled to receive a relocation notice. For tenants in commercial leases, the requirements for a relocation notice are generally set out in your lease. The relocation notice must describe the alternative premises that your landlord proposes that you move into, so that you can decide if such premises are “reasonably comparable” to your existing premises. 

If the premises have already been built, you should arrange to inspect the new premises to assess its suitability in terms of: 

  • general appearance;
  • neighbouring businesses; and 
  • the level of foot traffic. 

If you do not approve of the proposed relocation, you can generally terminate the lease. If you accept the proposal for the alternative premises, your landlord must offer you a new lease on the same terms and conditions as your existing lease. The term of the new lease should also be the length of time remaining on the existing lease. 

A landlord will also need to pay your reasonable costs of relocating to the alternative premises. They may also have to pay compensation, depending on the location of your new premises.

Key Takeaways

Landlords may terminate leases for a variety of reasons, which are not always limited to a tenant breaching a material term of the lease. If your landlord is terminating for breach, they must carefully follow any processes in the lease, such as providing a termination notice and an opportunity to rectify the breach. They should also comply with the laws relating to retail leases if applicable. 

Your landlord can also terminate if they have a genuine proposal to demolish, refurbish or renovate the building that houses your premises. To check whether your landlord has a right to terminate, you should thoroughly review your lease agreement and the relevant leasing legislation. If you need assistance with your lease, contact LegalVision’s leasing lawyers on 1300 544 755 or fill out the form on this page.

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