NSW Professional Conveyancing Services
NSW professional conveyancing services play a crucial role when buying or selling property. Read more to make informed decisions about conveyancing matters.
23 April 2026
Surrendering Commercial Lease in NSW: What To Do
- Pelagio Palma Jr., BA, LLB, LLM, MBA
- Estimated reading time: 8 mins
Entering a commercial lease is a big responsibility. Moreover, as a tenant, the possibility of being put into an unfortunate situation is likely to happen at any time. One of which is surrendering commercial lease in NSW. When that time comes, will you know what to do?
A tenant must consider several factors before signing a commercial lease. Hence, the agreement itself requires a careful understanding of all the terms stipulated in the lease contract. As a tenant, you should also have an awareness of the risks and responsibilities associated with signing and entering into a lease.
What is a Commercial Lease?
A commercial lease is a contract over a leased property that sets out the rights and obligations between two parties: the lessee and the lessor. The owner of the property subject to lease is generally referred to as the lessor or landlord. On the other hand, the person that will occupy the leased premises over a certain period or term is called the lessee or the tenant.
A commercial lease is also used to conduct business or its operations—e.g., particularly office space, industrial units, storage sheds, working yards, and other non-residential purposes.
A commercial lease usually includes, but is not limited to:
- lease term;
- rent and if, and when, it can be changed or increased;
- in any case, has agreed securities;
- fixtures and fittings;
- repair and maintenance;
- option for renewal or extension;
- address and description of the premises;
- any outgoings; and
- “make good” provisions.
Commercial vs Retail Lease
Similar to commercial lease, retail lease is also a contract over a leased property. However, retail lease is governed by the Retail Leases Act (1994), with further changes in the Act that came into effect in 2017.
In NSW, a retail lease is particularly required if a business:
- sells goods or supplies services—whether in a shopping centre or in some cases, those in a permanent retail market;
- is a shop that is less than 1,000 square metres in size; and
- in any case, has a lease term between six months and 25 years.
How to Get Out of a Commercial Lease
Because of the changing market landscape, businesses are prone to experience challenges that may lead to failure. Unfortunately, if this happens, business owners may be forced to surrender their leases to avoid further financial damage. Thus, it allows them to recoup their remaining resources and redress their situation.
Ending the lease before the expiration of the lease term can be possible. Hence, this requires a mutual agreement between the landlord and tenant to make it happen. As a tenant, there are two ways for you to certainly get out of a commercial lease:
1. Find Another Tenant
One way to get out of a commercial lease is to find another tenant. Hence, you can assign the lease to a replacement tenant or assignee provided the landlord has given consent.
Lease agreements often include a clause as to the landlord’s requirements for assigning the lease. Indeed, assignment of lease enables you to transfer your tenant rights and obligations to an assignee. If you have fully satisfied the landlord’s requirements, then you may request to be released from the lease.
Once you have confirmed the landlord’s consent, you may formalise the transfer agreement using a Deed of Assignment. All the details of the agreement between you as the assignor, the assignee, and the landlord are also included in the deed.
As the assignor, you must also pay the necessary fees for transferring the lease to the assignee. It may include the legal and other further expenses the landlord has incurred by giving you the consent to transfer the lease.
2. Surrender the Lease
Nowadays, surrendering commercial lease is a common situation both tenants and landlords deal with. Despite both parties agreeing with the lease term, ending it before it expires is possible. Surrendering a lease can be a complex and frustrating problem to manage, but with patience, knowledge, and legal advice, it can be successful.
Surrendering Commercial Lease in NSW with 3 Steps
To formally surrender a commercial lease, the NSW Small Business Commissioner provided the following steps:
Step 1. Negotiate the Exit Terms
Negotiating with the other party is the first step in surrendering commercial lease in NSW. In addition, you and the landlord must negotiate the terms and conditions until you both arrive at an agreement that works for all. Also, this includes agreeing on a financial settlement or “break lease fee.”
However, if you and the other party cannot reach an agreement, a neutral third-party mediator may help aid the situation. This is done through the process of mediation.
Mediation Process
Mediation is a type of Alternative Dispute Resolution (ADR). It also provides a cost-effective way to resolve issues between you and the landlord without going to Court. Moreover, mediation can help you preserve your relationship with the other party.
To start mediation, you and the landlord must first appoint an independent mediator to facilitate the discussions. During the discussions, the mediator may give recommendations to help you and the other party reach a mutual agreement as to the surrender of the lease.
Anyway, if you and your landlord cannot agree on who to appoint as a mediator, you may ask the Commission for assistance. Then, after applying for mediation and completing the mediation application form, the Commission will appoint a mediator for you. Furthermore, mediation through the Commission may be conducted in person or online.
Mediation will enable you to explain your circumstances without bias or prejudice. You will also have the chance to hear the other party’s perspective on the situation. Thus, enabling you to better understand each other and determine a reasonable solution.
Step 2. Prepare a Deed of Surrender
At this point, after arriving at an agreement, you must formalise the terms of surrender through a Deed of Surrender of Lease, a legally binding document that outlines the terms and conditions of the settlement.
However, there are several risks and consequences in executing the deed for both you and the landlord. Hence, it is important to ensure that you and the other party fully understand and agree to the terms before signing it. Moreover, it is recommended that you and the landlord consider seeking independent legal advice before preparing the deed.
Why Informal Agreements Won't Work?
Formalising the surrender of the lease with an agreement that meets legal requirements is the most important thing to keep in mind. Often, parties negotiating a surrender of a lease reach a settlement that is through informal agreements. Although, this poses risks and legal challenges and may be overturned. Furthermore, an informal agreement is not legally binding and can result in further disputes between you and the landlord. Therefore, it is crucial to seek legal advice and ensure that all necessary terms and conditions are included in a formal agreement to avoid any potential legal issues in the future.
Step 3. Removal of Property
Aside from dealing with the deed, as a tenant, you should also sort out the removal of your property from the premises. In this case, the landlord must give notice and a reasonable time for you to collect the property. Moreover, as a tenant, you should arrange a suitable time to collect it. However, without any agreement relating to the property, you may be liable to the landlord for compensation or damage for leaving the property on the premises.
How can VC Lawyers Help?
Surrendering commercial lease in NSW requires careful consideration of all the implications it may have. Usually, this further happens if the business has failed or is looking for ways to stay afloat. The process can also be daunting and, as a tenant, seeking legal advice can help.
At VC Lawyers, we can manage complex work for you. Our solicitors have extensive experience in commercial lease negotiations and can certainly guide you through the process, whilst ensuring that your rights are protected, and your interests are carefully considered. Despite every situation being unique, VC Lawyers is here to offer you solutions that are tailored to your needs.
Contact us today to learn more about how we can assist you with your commercial lease negotiations.
NB: This blog post is neither a legal advice nor intended to be such, and is only for general information. The same should not also be taken as a financial or commercial advice. The reader must personally consult their professional adviser/s on the contents of this blog post. VC Lawyers is not liable for any loss or damage, direct or consequential, as a result of the reader’s or a third person’s misconstruction of the wordings or use/misuse of the contents of this blog post.
Share with your Friends:
NSW Immigration Assistance Services
Whether you are coming to live, work, study, or invest, VC Lawyers can help you with reliable NSW immigration assistance services. Read here to know more!
24 March 2026
BFA NSW Easy Guide
This BFA NSW easy guide is here to explain how BFA works, when appropriate, and what is required for them to be legally effective. Read here to know more.
16 February 2026
VC Lawyers is a member of the DBA Group of Companies.
© 2023 VC Lawyers. All Rights Reserved. Powered by Ideas and Concepts.
VC Lawyers is a member of the DBA Group of Companies.
Give us a call: 1300 078 362