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Options in Commercial and Retail Leases – What Tenants Need to Know
Options in retail and commercial leasing
QBM Lawyers act in all areas of retail and commercial leasing, including leases of real and personal property. Whether a lease can be renewed or extended depends on the terms of the lease, including any option to renew.
Where a lease includes an option term and the tenant exercises that option in accordance with the lease, the landlord is required to grant a further lease on the terms set out in the agreement.
Failing to properly exercise an option under a retail or commercial lease can result in the loss of the right to renew. In some cases, the landlord may refuse to grant a further lease at the end of the term, leaving the tenant without premises.
FAQs about option terms in retail and commercial leasing Gold Coast Given the potential consequences, we have outlined common questions tenants ask about retail and commercial leasing.
How do I exercise my options?
How and when an option must be exercised depends on the terms of the lease. These requirements are usually set out in the option to renew or further term clause and typically address:
- Whether the notice exercising the option must be in writing and signed
- The timeframe in which notice must be given to the landlord. This is often a specified window, such as no earlier than nine months and no later than six months before the lease expires
- The correct party to whom the notice must be given. This may be the landlord, the landlord’s agent, or a centre manager in the case of retail premises
It is important that the notice strictly complies with the requirements of the lease, including how it must be given. Failure to follow these requirements may invalidate the notice. For example, if the lease requires notice to be served by post to a registered address, sending the notice by email may not be effective.
Does my landlord have to remind me of my option to renew?
If your lease is a Queensland retail shop lease under the Retail Shop Leases Act 1994 (Qld), the landlord must give written notice of the option period between 2 and 6 months before the option expires.
The Act does not provide a remedy if the landlord fails to give notice within that period. For non-retail commercial leases, whether a reminder is required will depend on the terms of the lease.
To confirm whether your lease is a retail shop lease, refer to the Retail Shop Lease Regulation 2016.
I’ve exercised my option, what happens next?
After an option is exercised, the landlord will usually prepare formal lease documentation, often by way of a variation or amendment. This document updates matters such as the new expiry date, rent payable during the option term and any further option periods.
Unless the document provides otherwise, the existing terms of the lease will continue to apply.
For a retail shop lease, the landlord must provide an updated disclosure statement within 7 days after receiving the notice exercising the option, unless this requirement has been waived. If the landlord does not provide the disclosure statement, the tenant may have a right to terminate the lease within the first 6 months of the option term.
I’ve exercised my option but the landlord will not renew the lease, why?
Where a lease includes an option to renew, the landlord is not required to grant a further term unless the option is exercised strictly in accordance with the lease.
In most cases, this requires:
- A valid notice exercising the option, given in accordance with the lease
- The tenant not being in default under the lease at the time the option is exercised
I missed exercising my option, can I still exercise it late?
If the notice period for exercising an option has expired, the right to a further term is usually lost. The landlord is not required to accept a late exercise of the option. In practice, some landlords may agree to proceed with a new lease on commercial terms. In those circumstances, the arrangement is treated as a new lease and the terms are open to negotiation.I’ve exercised my option but changed my mind, can I withdraw it?
If an option is exercised in accordance with the lease, both the tenant and the landlord are generally bound to the further term. An option may be withdrawn in limited circumstances, most commonly where the notice exercising the option is invalid. Examples include:- The notice is given outside the required timeframe
- The notice is not served in accordance with the lease requirements
- The notice is not in writing or not properly signed where required
- The wording of the notice does not clearly exercise the option
- The notice is given by a person without authority to act for the tenant
- The notice seeks to vary the lease terms in a way that is inconsistent with a valid exercise of the option
For advice on retail and commercial leasing matters, please contact Peter Muller at peterm@qbmlaw.com.au
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Missing an option deadline can leave your business without premises. QBM Lawyers advises tenants and landlords on all aspects of commercial and retail lease options across Queensland.
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Frequently Asked Questions
An option to renew gives a tenant the right to extend the lease for a further term, provided it is exercised strictly in accordance with the lease.
If the option is not exercised within the required timeframe, the right to renew is usually lost. The landlord is not required to accept a late exercise.
Yes, lease agreements set out strict requirements, including timing, form of notice and how it must be delivered. Failing to comply may invalidate the notice.
A landlord may refuse if the option has not been exercised correctly or if the tenant is in default under the lease at the time of exercise.
You should seek advice well before the option period begins to ensure deadlines are met and your right to renew is protected.
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- Building and Construction Litigation
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- Excluded Individual/Licence Cancellation
Liability limited by a scheme approved under Professional Standards Legislation.
©2024 QBM Lawyers. All Rights Reserved
- Building and Construction Litigation
- Gold Coast Building Lawyers
- Excluded Individual/Licence Cancellation
Liability limited by a scheme approved under Professional Standards Legislation.
©2024 QBM Lawyers. All Rights Reserved