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27 May 21


Many landlords will be familiar with the concept of leases, but what are the options when a lease is up for expiry?


Option to Renew a Commercial Lease

If an option to renew a commercial lease is in place Neilson Partners Commercial will write to their landlord 10 months before the expiry date to seek direction as to if they want to renew the lease or not.

This notice does not need to be provided if a tenant has not abided by his or her lease terms and conditions during their tenancy occupation. In this case, written breaches are served to the tenant.

In these notices, the basic terms, and conditions that the renewal would be based on are outlined. If such direction is not received from the tenant in the 3 months prior to the lease expiry date the option is technically sacrificed unless the landlord is willing to accept the notice late. If a tenant does give direction and they wish to renew a lease agreement, a landlord is legally unable to reject their request.


When There are no Options to Renew a Commercial Lease

If there are no options to renew a commercial lease Neilson Partners Commercial will write to their landlord 10 months prior to the lease expiry date to seek instruction as to whether a new lease is granted or if they want to re-take possession of the premises.

In many cases, an investor would prefer to retain their tenant however, the formal expiry offers flexibility. For example, if a given owner has plans to occupy or develop the site at any stage the lease can be brought to a close without any of the issues relating to options.


What is an Overholding Lease?

The above-mentioned outcomes are the most common, however overholding a lease has become quite common, especially in the wake of COVID-19, for tenants who did not know where the state of their business was going to be 6 months down the track.

For those unfamiliar with the term, overholding is a monthly agreement where the existing terms and conditions of the original lease are still in place. In some cases, overholding allows the landlord the provision to increase the rent with one (1) month's written notice. It also allows both parties the option to end the tenancy at any given time with 3 months’ notice.

Your commercial property management team at First National Neilson Partners is happy to discuss any of the above content with you should you require clarity on your tenant’s current situation.

Contact Us on 9705 4888.


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