What Happens to a Tenant When the Lease Expires?

Summary

• When a fixed-term lease expires, a tenant may continue to occupy the premises under a periodic tenancy or a holdover arrangement, depending on the lease terms and the landlord’s conduct.
• Tenants should review their lease carefully to understand notice obligations, renewal rights, and the consequences of remaining in occupation after expiry.
• Failing to act on lease expiry can expose a business to uncertain tenure, increased rent, or liability for unlawful occupation.
• This article is a plain-English guide for business tenants in Australia on what happens when a commercial lease expires, prepared by LegalVision, a commercial law firm.
• LegalVision specialises in advising clients on commercial leasing matters.

Tips for Businesses

Review your lease well before expiry to identify renewal options and notice deadlines. Notify your landlord in writing of your intentions. If you plan to vacate, confirm your make-good obligations. If staying, negotiate terms early to avoid defaulting into a periodic tenancy on unfavourable conditions.

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On this page

• Leaving the Premises
• Make Good
• Time Constraints
• Key Takeaways
• Frequently Asked Questions

When a commercial lease expires, your obligations as a tenant do not simply disappear. You must actively manage the transition, whether you are renewing, vacating, or negotiating with your landlord. This article will explain what usually occurs when your lease expires and your available options and relevant obligations.

Leaving the Premises

You have the right to renew your lease when it expires. To do so, you must follow the procedures and timeline specified in the lease, usually 3-6 months before the lease ends. If you do not have the option to renew or choose not to exercise it, you do not need to provide the landlord with a specific time-period notice that you will not be renewing. The agreed-upon lease expiry date is when you must vacate the premises, so you can notify the landlord at any time before that date if you plan to leave. If you do not inform the landlord or indicate your intent to renew, they will assume you will vacate the premises by the lease expiry date.

Make Good

At the end of your lease term, you will generally need to return the premises to the landlord in the condition they were at the start of your lease. This also means it must be in a clean and tidy state. You will most likely need to carry out ‘make good’ obligations. The scope of these obligations can vary depending on what your landlord specifies under your lease. However, this typically  involves:

• removing any fitout you have installed;
• repairing any damage;
• redecorating, including repainting any internal walls and replacing carpets or floorboards; and
• restore the premises to their original condition at the start of the lease, including fulfilling all repair and maintenance obligations during the lease term.

However, many leases include a clause that allows the landlord to keep some of the fitout you installed, so you will be required to remove it.

How to End a Lease Factsheet

Need to exit your commercial lease early? Download this free guide to understand your options and avoid costly mistakes.

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Time Constraints

Leases often include a specific time period in which the landlord expects you to carry out your make good obligations. This will usually be within the last month of the term. It is important not to start this work too early. Doing so could put you in breach of the lease.

If your lease does not clearly outline any time constraints for making good the premises, you should clarify this with the landlord as soon as possible, well before your lease expires. Doing so will help you avoid potential disputes and ensure you meet your obligations under the lease.

Key Takeaways

As your lease expires, you must proactively understand and fulfil your responsibilities. Whether you intend to renew your lease or vacate the premises, being aware of your ‘make good’ obligations, time constraints, and communication with your landlord can help you navigate the process smoothly. By taking these steps, you can ensure a hassle-free transition and leave the premises on good terms, avoiding potential disputes.

LegalVision provides ongoing legal support for businesses through our fixed-fee legal membership. Our experienced leasing lawyers help businesses manage contracts, employment law, disputes, intellectual property, and more, with unlimited access to specialist lawyers for a fixed monthly fee. To learn more about LegalVision’s legal membership, call 1300 544 755 or visit our membership page.

Frequently Asked Questions