A commercial or retail lease may include an option or options for you to renew your lease after the initial term expires. But what happens if you change your mind and wish to withdraw your notice to renew the lease? Are you still bound to the further term? In this article, we explain the different scenarios in which you may able to withdraw your notice to renew a lease.
What is an Option to Renew?
An option to renew is a clause in a lease that allows you to renew your tenancy for another term.
For example, you may have an initial term of five years and two options to renew for five years each (i.e. five years x five years x five years). To exercise an option to renew, you:
- must usually provide written notice to the landlord within a certain time frame;
- must not be in breach of the lease at the time of providing the notice; and
- will likely need to finish this term of the lease.
However, if you decide after sending the written notice that you do not want to renew your lease, you may be able to withdraw it in several situations.
The Notice Was Unclear
You may be able to withdraw your notice if the wording used was not clear enough. For example, in one Victorian case, the tenant wrote to the landlord to advise of their “intention to exercise our lease option for a further six-year period.” The tenant successfully argued that they did not plan to exercise their option using that notice. Rather, they only wanted to notify the landlord of their intention to exercise the option in the future. Since the tenant did not use “clear and unequivocal” wording, the tenant did not validly exercise the option. They were not bound to the further term.
The Notice Was Conditional
You may be able to withdraw a notice if you made it subject to conditions which the landlord does not, or cannot meet. For example, in one New South Wales case, the tenant wrote to the landlord to ask for:
- “at least another 20 years” (when the option offered was for 20 years only); and
- a “tie-in” lease to other properties (when the lease only currently covered one property).
By including those conditions, the court held that the tenant did not clearly communicate their intention to exercise the option that the lease offered. This meant that the notice was invalid and the tenant could withdraw it.
The Landlord Sent the Notice Incorrectly
A lease will usually set out specific requirements about how you should provide notice to the landlord. In most leases, the tenant must provide the notice:
- in writing; and
- send it to the landlord’s business address so there is a written record.
According to one case in New South Wales, it may also be sufficient to send an email to the landlord if the lease requires written notice (but not necessarily physical delivery). To be valid, the content of the email:
- must be unambiguous; and
- the tenant must display the name and email address of the sender clearly.
This means that you may be able to withdraw your notice if you made it verbally or not in accordance with the delivery requirements in the lease.
The Landlord Sent the Notice at the Wrong Time
A lease will also usually set out specific requirements about when a tenant should provide notice to the landlord. This time frame is typically between three to nine months or six to nine months before the previous term expires. If you provide notice outside of the prescribed time, you may be able to withdraw your notice as long as the landlord has not already accepted the notice.
For example, in one Queensland case, the tenant did not exercise their option within the required timeframe. Therefore, the landlord argued that their notice was void. However, since the landlord accepted their assessment of the market rent by their conduct, the court held that the tenant was entitled to the further term.
The Notice Included a Request For Substantial Changes to the Existing Leases
You may also be able to withdraw your notice if it includes changes that are so substantial that a court could not consider that it is a renewal of the same lease.
For example, in one South Australian case, the tenant wrote to the landlord to inform them of their intention to extend their lease. The tenant also wanted to re-negotiate key elements of the lease including:
- adding another option;
- expanding the premises;
- engaging another lawyer to draft the lease; and
- having the lease registered on the title.
Since the tenant requested considerable changes and the landlord had not determined the rent for the further term, the court held that the tenant did not validly exercise their option. This meant that the lease had expired and had automatically converted into a monthly tenancy where the tenant was entitled to terminate the lease by giving the landlord one months notice.
Whether you can withdraw your notice to exercise an option to renew will depend on:
- what the notice said;
- whether the notice included any conditions;
- how and when the notice was delivered; and
- whether it was made subject to further negotiation between the parties.
If you require assistance in determining whether you can withdraw your notice to renew a lease, get in touch with LegalVision’s leasing lawyers on 1300 544 755 or fill out the form on this page.
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