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Options in Commercial and Retail Leases – What Tenants Need to Know
Options in Retail & Commercial Leasing Gold Coast
QBM lawyers for commercial leasing Gold Coast act in all forms of real and personal property leasing. Your commercial lease’s ability to be renewed or extended relies on whether it has an option term.
If there is an option term and you choose to renew, the landlord must grant you a new lease, provided you comply with certain lease provisions.
Failing to exercise your option correctly according to your retail or commercial leases can result in losing the right to renew. The worst-case scenario is the landlord refusing to enter a new lease upon expiry, leaving you without premises.
FAQs About Option Terms in Retail & Commercial Leasing Gold Coast
Given the serious consequences, we have outlined common questions below that tenants ask about retail and commercial leasing Gold Coast.
How Do I Exercise My Options?
How and when you exercise your option will depend on the specific requirements of commercial leases. These are in the “Option for Renewal” clause. It is also sometimes referred to as a “Further Term” clause and outlines;
- Whether the notice exercising the option needs to be in writing and signed by you
- The timeframe in which you must provide the notice to the landlord. For instance, the notice time might vary to at least six months. However, no more than 9 months before the lease’s existing term expires
- Deliver the notice to the appropriate party. The party could be the landlord, the landlord’s property agent, or possibly the centre manager if your premises are in a shopping centre
Moreover, it is crucial to ensure your notice strictly complies with the lease requirements regarding form and delivery, as this affects its validity. For example, if your lease states that a notice can only be served by post to the landlord’s registered office, you cannot exercise the option by emailing the landlord.
Does my Landlord have to Remind me of my Option to Renew?
If your lease is a Queensland ‘Retail Shop Lease‘ ’ and subject to the Retail Shop Leases Act 1994 (Qld), your landlord must give written notice 2 to 6 months before your option to renew expires.
However, the Act provides no protection if the landlord fails to notify you within the 4-month window. For commercial leases, the lease terms will decide if the landlord must remind you.
To check if your lease is a Retail Shop Lease, refer to the Retail Shop Lease Regulation 2016 online.
I’ve Exercised my Option so what Happens Next?
After you exercise your option, the landlord will prepare formal lease documents, usually as an amendment. This amendment adjusts terms like the expiry date, rent payable from the commencement date of the option term and remaining options. Crucially, unless it clearly states otherwise, the lease amendment will uphold all previous clauses.
For a ‘Retail Shop Lease,’ the landlord must give you a current disclosure statement within 7 days of receiving your notice to exercise the option unless you’ve signed a waiver (section 21E(2)-(3), Retail Shop Leases Act 1994 (Qld)). If the landlord fails to provide the statement, you can terminate the lease within the first 6 months of the option term.
I’ve Exercised my Option but the Landlord won’t Renew my Lease, Why?
When your lease includes option terms, the landlord does not automatically grant them when it is time to renew the lease. Depending on the terms of the lease, your right to renew a lease is almost always subject to the following:
- You provide the landlord with a valid notice exercising the option; and
- You not being in default or breach of the lease.
For example, if you’re behind on rent or haven’t maintained the condition of the premises as per the lease, the landlord isn’t required to grant a new lease.
I Missed Exercising my Option in my Lease, Can I still Exercise my Option Late?
If you miss the notice period to exercise your option, you forfeit your right to a further term. Once the notice period expires, the landlord cannot waive this requirement. This means if you exercise the option late, the landlord is not obligated to grant you a new lease after the current one expires.
However, we often find that landlords are willing to proceed with a renewal as if you had properly exercised the option. In these cases, they treat the renewal as a new lease, and all terms are subject to renegotiation.
I’ve Exercised my Option but I’ve Changed my Mind and Want to Vacate When My Lease Expires. Can I take it Back?
If you give notice per the lease terms, both you and the landlord are bound to the new term.
However, you may withdraw your exercise of the option in certain circumstances, typically when the notice was invalid.
- Giving the notice outside the specified notice period in the lease.
- Failing to deliver the notice to the landlord in strict compliance with the lease’s service requirements.
- Providing the notice orally when the lease requires it to be in writing and signed by the tenant, or vice versa.
- Using wording in the notice that does not clearly indicate the option is exercised, such as stating an “intention to exercise,” may not be sufficient to demonstrate a clear and unequivocal exercise of the option.
- Having an individual give the notice on behalf of the tenant without the requisite authority or power.
- Requesting substantial amendments to the lease and renegotiation of terms in the notice, to the extent that it could not be considered a renewal of the lease on the same terms.
- If your lease is a ‘Retail Shop Lease,’ providing the landlord with a written notice within 14 days of receiving the landlord’s current disclosure statement, withdrawing your exercise of the option (section 21E(4), Retail Shop Leases Act 1994 (Qld)).
For all enquiries related to retail and commercial leasing Gold Coast, please contact our property lawyer Peter Muller (peterm@qbmlaw.com.au) for assistance.
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