Lessees – watch out for demolition clauses!

Lessees – watch out for demolition clauses!

If you have a demolition clause in your lease – watch out!  The Queensland Courts have just confirmed that lessees are not entitled to any compensation if a lessor terminates a lease pursuant to a demolition clause, other than compensation for your fit out that you can’t move to new premises.

A “demolition clause” is a clause in your lease that documents that you and the lessor have agreed that the lease can be terminated early by the lessor if the lessor decides to demolish the building in which the premises are located.  As long as the lessor complies with requirements in the Retail Shop Leases Act 1994 by giving you at least 6 months notice of the intended demolition, they are entitled to terminate the lease and only pay the limited amount of compensation for your fit out.  You are not entitled to any compensation for your costs of moving, fitting out new premises, loss of income or any difference in rent.  This means that you could be out of pocket

If you are considering signing a lease that has a demolition clause in it, we recommend that you either ask the lessor to remove it or agree with the lessor as to the amount of compensation that you will be paid if they do terminate the lease under that clause.  If you do not, you may need to spend time and money arguing with the lessor about the amount of compensation you are entitled to.  You may also be entitled to less compensation that you would have expected if the Queensland Civil and Administrative Tribunal has to decide how much compensation you should get.

It is very important that you get legal advice from an experience leasing lawyer before signing a lease to ensure you are fully aware of these sort of issues.  Setting up in new premises can be expensive, which is why we offer you fixed fees to review your lease to give you peace of mind about your legal costs.  We have quick turnaround times and a friendly and approachable team who will give you advice in plain English.

If you would like our team to review your lease, please contact us today using the contact form.

©2022 Copyright MacDonnells Law. All rights reserved.