Getting out of an office lease early

Why you cannot simply hand back the keys

A lease is a contract for the whole term. Vacating the premises does not end it, and a landlord whose tenant has walked out is entitled to keep charging rent, call on the bank guarantee, and pursue the difference. Landlords are commercially minded and most would rather re-let than litigate, but the starting position is that every month remaining is owed.

That is why the practical question is never "can I leave" but "which of the four routes costs least, and how fast can I run it".

Assignment and sublease: finding your own replacement

Assignment transfers the lease to another business. From the day it completes, the incoming tenant is the landlord's tenant, and in most Australian leases the outgoing tenant is released, although some leases keep the original tenant liable for the remainder, so read the assignment clause before relying on it. The landlord must consent, and the usual test is that consent cannot be unreasonably withheld for a tenant of comparable standing who will use the space for a permitted purpose.

A sublease leaves you in place as the tenant and puts someone else in the space. You collect rent from them and keep paying the landlord. It works when the incoming business wants a shorter run than you have left, or only part of the floor, and it suits a tenant who expects to grow back into the space. The cost is that you remain fully liable if the subtenant stops paying, and a sublease can never run past your own lease.

In both cases the landlord's consent process takes time and often a fee for their legal costs. Start it as soon as the decision is made, because the marketing of the space is what takes the months, not the paperwork.

Surrender: buying your way out

A surrender is an agreement with the landlord to end the lease on a date, in exchange for a payment. There is no formula. A landlord who can re-let quickly at a higher rent may accept a modest sum; one facing a soft market and a long void will want something close to the remaining rent, and may also want the make-good done or paid for.

The negotiation is stronger when you arrive with a replacement tenant, when the market is tight, or when the landlord has a reason of their own to want the space back. It is weakest when you have already left and the space is sitting empty in your name.

Break clauses: the option you have to buy before you sign

A break clause is a right to end the lease at a fixed point, typically on six months' written notice and often conditional on rent being fully paid up. It is the cleanest exit there is, and it only exists if it was negotiated before signing. Landlords price it: a lease with a break may come with a smaller incentive or a slightly higher rent, because the landlord is carrying the risk of an early void.

For a business that cannot see five years ahead, that price is often worth paying, and it is a far better answer than the serviced-versus-traditional debate implies, because it lets you take a conventional lease with some of the flexibility of a licence.

The serviced office answer

A serviced office agreement is a licence, not a lease. Terms run in months, and the agreement ends on notice, most commonly one to three months depending on the operator and the length of the initial term. There is no assignment, no sublease and no make-good, because you never held the space itself. If the reason you are reading this page is that you are not sure how long you will need an office, that is the product designed for the question.