A deed of surrender of lease is a document used where both parties are agreeing to ‘surrender’ the lease according to the terms of the deed. It is a way for both parties to terminate the lease. This article explores different aspects of the deed such as when parties use it, standard clauses and issues for parties to consider.

When is it Used?

Parties can use a deed of surrender of lease where they both no longer want to have a lease agreement and have reached an amicable decision to terminate. It can also be used when the tenant is changing business structure and wants the lease to be held under the new entity name, such as changing it from a sole trader to a company.

What are the Key Clauses?

The deed will specify some conditions the parties must first meet to surrender the lease including requiring the tenant to pay all rent and outgoings (if applicable) under the lease up to and including the date of surrender. It may also include a condition that parties enter into the deed on the condition they enter into a new lease if needed in the circumstances.

The deed may require that the tenant ‘make good’ the premises by the date of surrender meaning that they have to return the premises to the condition it was in before they leased the property. Generally, both parties are also required to release each other from any claims arising out of the lease were it not surrendered. This is to make sure the tenant and the landlord are fully protected after the surrender date.

If the lease is a registered lease, it is common to require the tenant to provide the lessor with a stamped form of surrender of lease that can be registered to remove the tenant’s interest in the property.

The final part of the deed sets out the boilerplate clauses that are required to cover some of the practical aspects of the transaction. For example, it will usually include a notice clause, setting out how parties must make and deliver notices. It is also common to set out which party is responsible for paying the legal costs for the preparation of the deed. Standard clauses in most contracts will also reference how to pay GST and what governing law and jurisdiction apply to the contract.

What Issues Should I Know About?

It is necessary that parties understand the specific conditions required to satisfy the deed and surrender the lease. A leasing lawyer should review the deed for you to ensure the conditions are reasonable, clear and don’t place an unrealistic burden on the tenant.

It is also important to note what costs you will be responsible for paying, whether that be your legal costs and the legal costs of the landlord, as well as any lease registration fees or stamp duty. Discussing with the lessor the exact fees you will be required to pay will help you ensure that you can meet the stated conditions. Also, knowing what you are entitled to regarding reimbursements, such as the security bond or bank guarantee and any interest on these amounts, is essential to make sure you receive what you are owed in a timely fashion.

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If you have any questions about your rights and obligations under a deed of surrender of lease, get in touch with our commercial leasing lawyers on 1300 544 755.

Bianca Reynolds

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