What are demolition and relocation clauses?
Published 26 Mar 2019
In any agreement around the renting of a commercial property, there are generally clauses around how the lessee or lessor might terminate the lease early. Demolition and redevelopment clauses are two such that you might find which allow an agreement to be brought to a premature end. Here's what you need to know about them as a tenant.
The demolition clause
If your agreement contains a demolition clause, this means that your lessor can terminate your lease if they're planning to demolish the building where you're located. However, to do so within legal bounds there are some rules they have to abide by, including:
- Giving you six months' notice if the term of your lease is over 12 months.
- Giving you three months' notice if your lease is for 12 months or less.
- Providing you with sufficient details around the proposed demolition to verify that they genuinely intend to proceed within a reasonable time period of the lease ending.
The term 'demolition' also includes other acts, such as your lessor undertaking substantial repairs or reconstruction on the building. They can only invoke this clause if their actions are consistent with Section 35 of the Retail Leases Act 1994.
As the tenant, you have the choice to terminate the lease at an even earlier date than the one given by them. You're only required to provide seven days' written notice.
The relocation clause
Occasionally, a lessor may decide to give their property an extensive face lift. To do so, they must relocate you as a tenant. When reading over this clause it's important to note that:
- By law, your landlord must provide you with a minimum of three months' written notice.
- They must give you details around the proposed redevelopment, and the reasons why they cannot carry it out without you being relocated.
- Your lessor must let you know where you're being relocated to.
- If you're being relocated to an inferior property, they must adjust the rent accordingly.
- Your entitled to payment from the landlord to cover the reasonable costs incurred by your relocation.
You can write into the clause the right to hold your lease for a given amount of time before your lessor might notify you of redevelopment. If the relocation is not suitable for your needs, or you decide that terminating the lease is the best option moving forward for you, you're allowed to bring the agreement to an end.
If you're entering into a commercial lease, make sure you're prepared with the best legal advice. Contact Malouf Solicitors today for assistance.
Please call us on 02 8833 2000 to speak with a lawyer
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