My Shop Lease in NSW is About to Expire – What Next?

In Short

• Lessors must provide written notice at least 6 months before your lease expires, stating renewal or vacate terms.
• If no notice is given, your lease is extended by 6 months, and you can terminate with one month’s notice.
• You may renew the lease or vacate, with obligations to make good the premises.

Tips for Businesses

Ensure you receive written notice from your lessor before your lease expires. Understand your renewal or vacating options, and always get clear confirmation of the lessor’s requirements in writing. If vacating, negotiate your make-good obligations, and promptly request the return of any security deposit.

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Table of Contents

• Lessor’s Obligation to Give Notice
• How to End a Lease Factsheet A factsheet that sets out the three ways to end a commercial lease in Australia: surrendering your lease, assigning it or subletting it. Download Now
• Renewing the lease
• Vacating and Yielding Up
• Key Takeaways
• Frequently Asked Questions

Your business has been running at full speed, and suddenly, your shop lease is nearing expiration. What do you do if there is no option to renew? Understanding these steps will help prepare you for any issues arising as your lease ends. This will ensure you know what actions to take if the lessor does not comply with the legal requirements. This article outlines the lessor’s obligations, how to renew your lease, and your rights if notice provisions are unmet.

Lessor’s Obligation to Give Notice

Under the Retail Leases Act 1994 (NSW), the lessor has a positive obligation to give you written notice that your lease is ending. They must also notify you if they intend to renew your lease or require you to vacate the premises at the expiry of the lease term. The lessor must give you this notice at least 6 months before your lease expires. With a short-term lease of fewer than 12 months, the notification period is three to six months before the lease ends.

Under the Act, your lease will be extended if the lessor fails to notify you in writing. Accordingly, the expiry date will not be until six months from the date of the lessor’s notice. You have a right to terminate the lease anytime during the six-month extension period. You can do so by giving the lessor at least one month’s written notice.

How to End a Lease Factsheet

A factsheet that sets out the three ways to end a commercial lease in Australia: surrendering your lease, assigning it or subletting it.

Download Now

In most leases, you can hold over on a monthly tenancy at the expiry of the lease term. Here, you will become a periodic tenant or a tenant at will. During a holding over period, the same lease terms apply. However, the clause itself may change your lease obligations. This may include:

• the method for determining rent annually so that rent is increased by a higher percentage than during the initial term; or
• topping up the security deposit to align with the increased rental amounts. 

During the extension period of your lease, the law prohibits the lessor from publicly advertising your shop premises unless:

• the lessor has offered you a renewal or extension of the lease, and you have not accepted the offer;
• the lessor has informed you by written notice that they do not intend to offer you a renewal or extension of your lease, and there are, therefore, no arrangements to allow you to remain in possession of the shop premises; or
• you have given the lessor written notice that you do not wish to enter into a negotiation for the renewal or extension of your current lease.

Renewing the lease

There are two ways to document a lease renewal:

• the parties can sign a new lease agreement, or
• the existing lease can be modified to reflect the renewal terms.

Modifying the existing lease, known as a variation, extends the lease period while keeping most terms unchanged. This option is common when only minor changes are needed, as it helps reduce legal, registration, and administrative costs.

Alternatively, a new lease agreement may be created, which cancels the existing lease. This is often beneficial when there are significant changes, such as a new rent structure or renegotiated terms, allowing for a fresh start without the limitations of the original lease.

Vacating and Yielding Up

If your lease has ended and the lessor has given you the required written notice, you will typically need to return the premises to the condition specified in your lease. The lessor may request that you remove all fixtures and property, and repair any damage caused by their removal. Alternatively, the lessor might allow you to leave the property or offer to accept a cash sum instead of the make good obligation. In any case, getting written confirmation of what the lessor requires when the lease expires is essential. Suppose you provided a security deposit or bank guarantee, and the lessor has not used the total amount. In that case, you should request its return within a reasonable time after the lease ends, unless a specific timeframe is outlined in the lease.

Key Takeaways

If your shop lease in NSW is nearing expiration, it is crucial to understand your rights and the lessor’s obligations under the Retail Leases Act. Whether you plan to renew or vacate the premises, ensure you are prepared for each step. By staying informed and obtaining clear communication from the lessor, you can navigate the end of your lease smoothly and protect your business interests.

If you require further assistance, our experienced leasing lawyers can help. As part of our LegalVision membership, you will have unlimited access to lawyers to answer your questions and draft and review your documents for a low monthly fee. Call us today at 1300 544 755 or visit our membership page. 

Frequently Asked Questions