As a tenant, your commercial lease (or retail) determines your rights and obligations. The lease usually includes details of the terms of your lease and your options to renew the lease. By signing the lease, you commit yourself or your business to paying rent throughout the term of the lease in exchange for the right to occupy the premises.
However, there are specific circumstances when a tenant can get out of a commercial or retail lease. Some of these circumstances are outlined in this article.
Assigning the lease
The ability to assign the lease is a common clause included in commercial or retail leases. This means that you can transfer the lease from one tenant to another, for example, this can be used if you sell your business.
Western Australian laws usually confirm that a transfer of a lease can only be withheld when there are reasonable grounds. A reasonable ground could be that the incoming tenant does not have the economic viability to pay the rent for the length of the term or that the incoming tenant has the intention to use the premises in a way other than its intended use.
A Deed of Assignment of Lease will be required upon assignment of lease. The Deed should be carefully drafted to ensure that you (as the assignor and former tenant) will no longer be liable for the rent or other lease obligations, particularly . This document is usually prepared by the Landlord and the cost of the deed of assignment either paid by the assignor or share between the assignor and assignee.
Similar to assigning the lease, a tenant can find a sublessee to occupy the premises. The right to sublease will usually be included in the commercial or retail lease and the landlord will also need to approve the sublease (and the sublessee as a tenant). Although the sublessee will take over the physical occupation of the premises, you will still be bound by the terms of the lease as the lessee. This means that you will be responsible for fulfilling the legal obligations of the lease, including paying rent in the case of a sublessee’s default or damage to the premises.
Failure to comply with the terms of the Commercial Tenancy (Retail Shops) Agreement Act 1985 (WA)
As part of the commercial leasing laws in Western Australia for retail leases, tenants are to be provided with a disclosure statement and tenant guide (disclosure documents).
If these disclosure documents are not provided, are incomplete or contain false or misleading information, the tenant can terminate the lease in writing if it is within six months after the commencement of the lease. However, this is a limited right and legal advice should be sought if termination is being contemplated.
Please note these requirements relate to retail leases only and not commercial leases.
Breach of Contract
If there has been an essential or fundamental term of the lease that has been breached by the Landlord or another party, you may be able to terminate if the terms and conditions of the lease allow for it. The common law also determines certain circumstances when a contract may be void. This may include a repudiation of the terms in the lease or the provision of misleading or false statements that induced a party to enter into the agreement.
If you believe that there has been a breach of contract, you should speak to a lawyer that specialises in commercial leases to determine whether you would be able to terminate a lease based on a breach of contract.
Entering into a lease is a big commitment and the circumstances for terminating the lease from the tenant’s perspective are not always so clear cut. Speak to a qualified commercial lawyer before you enter into a lease agreement so you know what your rights and obligations are in case you do need to get out of your commercial or retail lease early.