What happens at the end of your lease
Preparing your lease exit?
Your lease will contain clauses specifying what occurs at the end of the lease. Generally, your lease will include:
1. Make good
This can be the most expensive part of the lease. Your lawyer should try and negotiate a make good that limits the amount of works needed to be completed at the end of the term.
Generally there are three levels of make good:
Basic – Leave the premises clean, tidy and secure. You will not need to remove any alterations to the premises which you have made resulting in minimal costs.
Medium – Return the premises in the condition as at the commencement date. This entails works to ensure that any fitout undertaken by you is removed and returned in the state you received the premises. We recommend taking notes and photographs before you sign the lease showing the condition of the premises.
High – return the premises in an open plan layout. The lease should specify the particulars of what is meant by open plan. Generally, this can include the medium level make good plus the reconfiguration of the premises to a base building standard which can include the removal of dividing walls, relocation of air conditioning vents and ducts and pipework to an open plan layout. This is the most expensive type of make good and should be avoided where possible in the negotiation of your lease.
In addition to the above, any damage made to the premises should also be remedied before you vacate the premises. Some leases also specify that you repaint the premises and perform other types of redecoration works.
It is possible that the landlord may accept a cash settlement in lieu of the above make good being completed which could be cheaper.
Until the above is complied with, the landlord can continue to charge you rent. The landlord may also be able to take your items left in the premises and store them and or dispose of them at your expense.
2. Holding over period
When your lease ends generally you will have the right to stay in the premises as a month to month tenant with the approval of the landlord with rent as agreed between the parties or as specified in the lease.
Please note that either party only has to give one months’ notice to the other to terminate the lease.
If you want to extend your lease and you have negotiated option period/s in your lease then you must exercise the option within the correct time frame. Your lease will contain a clause outlining when this option must be exercised, for example, between 3 and 6 months before the end of the term. If you exercise the option outside of this timeframe then the landlord does not have to provide you with an extension.
You must also ensure you comply with the correct notice requirements under the lease. For example, the lease can specify that all notices are to be provided to the landlord at a specified address and either delivered personally or sent to the address by registered post. Many tenants believe by emailing the landlord or the agent that this is a valid form of notice. Unfortunately, what you believe is valid notice may not be specified as such in the lease.
Once the option is exercised it should be documented via a Variation of Lease or a new Lease based on the same terms. Depending on the state, we suggestion registration of the Lease or Variation of Lease.
If your lease doesn’t contain an option you should contact the landlord and request an extension well before the expiry date so that you can either come to an agreement on the extended lease terms or find another premises.
It is recommended that in the last year of your lease, you should review the terms surrounding the termination and, if any, option clauses in the lease. This will ensure you are prepared for the exit or extension of your lease. You will then be able to plan adequately the next steps after the term of the lease ends.