Most leases, either commercial or residential, commonly lease premises for a long period of years.
However, during this period, the Landlord is bound by the lease and is unable to terminate the lease if the Landlord wishes to demolish or redevelop the leased premises.
Nonetheless, the Landlord may be able to terminate the lease if the Landlord included a provision in the lease to that effect.
Redevelopment/demolition clause
A demolition clause, also known as a redevelopment clause, is a term in the lease allowing the Landlord to terminate the lease if the Landlord wishes to demolish or redevelop the leased premises.
However, in order for the Landlord to do so, the Landlord’s proposed demolition or redevelopment must be done by a genuine proposal.
If the Landlord does not have a genuine proposal, the tenant may make an application against the Landlord which stops the Landlord from terminating the lease.
Furthermore, if the lease is deemed to be a retail lease, the Retail Leases Act NSW 1994 provides further protections to the tenants and imposes onerous obligations on Landlords.
How to effectively terminate a lease using the development/demolition clause
In order to effectively terminate a lease, the Landlord must:
- Properly disclose any anticipated demolition of redevelopment at the commencement of the lease;
- Properly draft the terms of the lease in order to ensure that those terms do not contravene with the Retail Leases Act NSW; and
- Terminate the lease using the appropriate form and provide the tenant with all relevant information to ensure that the proposal to either demolish or redevelop is deemed genuine.
If you require assistance or advice in relation to a demolition or a redevelopment of premises subject to a lease, contact the writer in order to arrange for consultation.
