Terminating a Commercial Lease
Terminating a commercial lease for breach is one of the most consequential steps a landlord or tenant can take.
It ends the tenant’s right to occupy, can trigger claims for damages, and, if mishandled, can expose the terminating party to serious liability.
The High Court’s lease termination cases emphasise that terminating a commercial lease is not a mechanical consequence of “a breach”: it is controlled by the lease terms, statute, and common law principles that are applied cautiously and by reference to the facts.
A key starting point is that ordinary contract principles apply to contractual leases, subject to an important qualification. In Progressive Mailing House Pty Ltd v Tabali Pty Ltd [1985] HCA 14, the Court stated at [4]:
… it should be accepted that, as a general matter and subject to one qualification, the ordinary principles of contract law are applicable to contractual leases.
That qualification matters in longer or more executed leasehold contexts, because (as the same passage explains) the further one moves toward viewing the tenant’s rights as an estate in land, the more difficult it will be to establish termination under doctrines such as fundamental breach.
Even where contractual doctrines apply, courts are slow to characterise tenant defaults as repudiation without clear justification. In Shevill v Builders Licensing Board [1982] HCA 47, Gibbs CJ warned at [8] that:
Repudiation of a contract is a serious matter and is not to be lightly found or inferred …
The point for lease termination is that repeated defaults (including rent default) will not automatically amount to repudiation; the question is whether, viewed in context, the tenant’s conduct demonstrates it would or could no longer perform its obligations under the contract.
Queensland’s statutory framework adds another layer of control. Section 124 of the Property Law Act 1974 (Qld) restricts the enforcement of a right of re-entry or forfeiture for breach unless notice requirements are met.
Relevantly, it provides that a right of re-entry or forfeiture shall not be enforceable, by action or otherwise, unless the lessor serves a notice specifying the breach and (if capable of remedy) requiring it to be remedied, and the lessee fails within a reasonable time after service.
Delay and inconsistent conduct can also create pitfalls around terminating a commercial lease. In Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd [1989] HCA 23, Mason CJ made clear that delay in performing a non-essential obligation does not, of itself, justify the other party refusing performance, stating at [18]:
Mere delay on the part of Capalaba in performing a non-essential contractual obligation cannot justify a refusal by Laurinda to perform its obligations. Something more … would be required.
Taken together, these authorities explain why the question “when can a commercial lease be terminated for breach in Queensland?” requires more than identifying a default. It requires careful attention to:
- the characterisation of the breach (including whether it is repudiatory or goes to the root).
- the lease’s termination machinery and any concurrent common law rights.
- Queensland statutory preconditions, particularly where forfeiture or re-entry is relied upon.
What Is a Breach of a Commercial Lease?
A commercial lease will usually contain numerous covenants and conditions regulating rent, use, alienation, repair, and other aspects of the landlord–tenant relationship.
However, the mere existence of a breach does not answer whether terminating a commercial lease is available. Australian courts have consistently distinguished between breaches that sound only in damages and those that may justify bringing the lease to an end.
Breach and Terminating a Commercial Lease
At common law, terminating a commercial lease is not the default remedy for breach. The High Court has repeatedly emphasised that the right to bring a contract to an end arises only in limited circumstances, namely where the breach is of an essential term or where the conduct amounts to repudiation.
In Ankar Pty Ltd v National Westminster Finance (Australia) Ltd [1987] HCA 15, the High Court reaffirmed that courts are cautious in characterising contractual obligations as conditions, observing at [11] that:
Courts are not too ready to construe a term as a condition and, at least where other considerations are finely balanced, will hold that a term is of such a kind that breach of it does not give rise to an automatic right to rescind.
Although Ankar v NWF concerned a suretyship arrangement connected to a lease, the Court’s reasoning reflects a broader contractual principle that applies equally in commercial leasing: termination is not available merely because a term has been breached.
Essential and Non-Essential Lease Obligations
Whether a breach justifies termination often turns on whether the obligation breached is properly characterised as “essential”. That question is one of construction, informed by the contract as a whole and its commercial purpose.
The High Court in Ankar Pty Ltd v National Westminster Finance (Australia) Ltd [1987] HCA 15 endorsed the longstanding principle that essentiality depends on whether strict performance of the obligation was fundamental to the parties’ bargain, stating at [8] that:
The terms of the contract itself demonstrate that the [party] would not have entered into the contract … unless he had been assured of a strict performance of the promise.
Applied to commercial leases, this reasoning explains why many commonly breached obligations, such as repair covenants or operational requirements, do not automatically justify termination unless the lease clearly elevates them to that status.
Serious Breach, Repudiation, and Future Performance
Even where an obligation is not essential, terminating a commercial lease may still be available if the tenant’s conduct amounts to repudiation. Repudiation is concerned not with past breach in isolation, but with what the conduct conveys about future performance.
In Hong Kong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd [1962] 2 QB 26, Diplock LJ explained that the critical inquiry is whether the breach deprives the innocent party of substantially the whole benefit of the contract, stating:
If what is done or not done in breach of the contractual obligation does not make the performance a totally different performance of the contract from that intended by the parties, it is not so fundamental as to undermine the whole contract.
Although Hong Kong Fir v Kawasaki is an English decision, its analysis has been repeatedly adopted in Australia and underpins the modern understanding of repudiation in commercial contracts, including leases.
Read this article on repudiation – Contract Repudiation: What Exactly Is It?
Remediable Breaches and Delay
Many breaches of a commercial lease are capable of remedy. A delay in performance, even if it causes inconvenience or loss, will not usually justify termination unless it frustrates the commercial purpose of the lease.
In Hong Kong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd [1962] 2 QB 26, the Court rejected the idea that any unreasonable delay entitles termination, holding instead that:
The charterer may rightly terminate the engagement if the delay in remedying any breach is so long in fact, or likely to be so long in reasonable anticipation, that the commercial purpose of the contract would be frustrated.
This reasoning is directly applicable to commercial leasing disputes involving delayed repairs, temporary rent arrears, or other remediable defaults.
Breach in Context
The authorities demonstrate that breach is a necessary but insufficient condition for terminating a commercial lease.
Courts assess breaches in context, asking whether the breach goes to the root of the lease or whether it instead attracts remedies short of termination, such as damages or statutory relief.
In Queensland, this common law analysis operates alongside statutory restrictions on forfeiture and re-entry, which may further limit the circumstances in which a breach can lawfully be relied upon to terminate a commercial lease.
Contractual and Statutory Controls on Termination in Queensland
Even where a breach is sufficiently serious in character, a landlord’s ability to terminate a commercial lease is constrained by two overlapping control mechanisms: the termination machinery contained in the lease itself, and statutory intervention that limits or conditions the exercise of forfeiture and re-entry rights. Queensland law treats both with strictness.
Termination Rights Must Be Found in the Lease
A landlord’s right to terminate for breach does not arise at large.
It must be grounded either in the common law doctrines of repudiation or in an express contractual right of termination contained in the lease.
Where terminating a commercial lease is sought under an express clause, courts construe that clause narrowly.
The High Court in Ankar Pty Ltd v National Westminster Finance (Australia) Ltd [1987] HCA 15 emphasised that contractual provisions conferring rights of discharge or termination are not to be expansively interpreted, stating at [21] that:
… ambiguous contractual provisions should be construed in favour of the party whose rights are said to be affected by the breach.
Although Ankar v NWF concerned a suretyship contract connected to a lease, the Court’s reasoning reflects a broader contractual principle applied in leasing cases.
Termination clauses must be expressed with clarity if they are to justify bringing a lease to an end.
Election, Waiver and Delay in Exercising Termination Rights
Even where a right to terminate for breach exists, that right may be lost if the landlord’s conduct is inconsistent with termination.
Australian law treats terminating a commercial lease as a matter requiring election: once a party, with knowledge of a breach, acts in a manner consistent only with the continuation of the lease, the right to terminate may be lost.
In Tropical Traders Ltd v Goonan [1964] HCA 20, Kitto J explained that a party entitled to rescind is not required to elect immediately, but must avoid conduct that affirms the contract, as stated at [9]:
The appellant was not bound to elect at once. It might keep the question open, so long as it did nothing to affirm the contract and so long as the respondents’ position was not prejudiced in consequence of the delay.
This principle is directly relevant to commercial leasing, where landlords frequently tolerate defaults, accept late payments, or negotiate before attempting to terminate a commercial lease.
Delay alone is not determinative, but delay combined with affirming conduct may be fatal.
Acceptance of Rent and Affirmation
Acceptance of rent or other performance after a breach may constitute affirmation, depending on its nature and timing.
In Tropical Traders Ltd v Goonan [1964] HCA 20, Kitto J made clear that acceptance of performance referable only to a period before termination does not necessarily affirm the contract, stating at [11]:
If the sum had included interest for any period beyond [the due date], acceptance of the payment would necessarily have implied the existence of the contract after that date.
This distinction explains why acceptance of rent accruing after the date of breach often presents a significant risk to landlords contemplating terminating a commercial lease.
Read this article – Evicting Tenant not Paying Rent
Estoppel and Conduct Inconsistent with Strict Enforcement
Beyond the election, termination rights may be affected by equitable estoppel, particularly where a landlord’s conduct leads a tenant to believe that strict rights will not be enforced.
In Legione v Hateley [1983] HCA 11, the High Court reaffirmed the principle that where one party induces another to believe that strict contractual rights will be held in abeyance, equity may intervene. Gibbs CJ and Murphy J cited with approval the principle at [9] that:
… if parties who have entered into definite and distinct terms involving certain legal results … afterwards by their own act or with their own consent enter upon a course of negotiation which has the effect of leading one of the parties to suppose that the strict rights arising under the contract will not be enforced … the person who otherwise might have enforced those rights will not be allowed to enforce them.
Applied to commercial leasing, this principle means that representations about extensions of time, indulgence, or holding over may prevent a landlord from later relying on a strict right to terminate a commercial lease unless clear notice is given that indulgence has ended.
Relief Against Forfeiture
Even where terminating a commercial lease is contractually and procedurally valid, courts retain an equitable jurisdiction to grant relief against forfeiture in appropriate cases. That jurisdiction has long applied to leases.
In Legione v Hateley [1983] HCA 11, the High Court traced the historical basis of the jurisdiction and reaffirmed its breadth. Quoting Lord Wilberforce in Shiloh Spinners Ltd v Harding, the Court noted at [19]:
The commonest instances concerned mortgages … and leases, which commonly contained re-entry clauses.
The Court further endorsed the principle that relief may be available where forfeiture operates as security for performance rather than as an end in itself:
… it is consistent with these principles that we should reaffirm the right of courts of equity in appropriate and limited cases to relieve against forfeiture for breach of covenant or condition.
In commercial leasing disputes, this jurisdiction is most invoked for non-payment of rent or other remediable defaults.
Interaction with Statutory Controls in Queensland
In Queensland, the equitable and contractual principles outlined above operate alongside statutory restrictions on forfeiture and re-entry.
Section 124 of the Property Law Act 1974 (Qld) imposes notice and remediation requirements before forfeiture may be enforced, and retail shop leases are subject to additional statutory controls.
While these statutes do not displace common law principles of election, estoppel or relief against forfeiture, they reinforce the same underlying theme identified in the case law: termination is a controlled remedy, not an automatic consequence of breach.
As Legione v Hateley [1983] HCA 11 demonstrates, even where time is expressly made of the essence, and a contractual right of termination has accrued, courts will examine the surrounding conduct and consequences before allowing forfeiture to stand.
Notice and Procedural Requirements Before Termination
Even where a landlord has a substantive right to terminate a commercial lease for breach, that right will often be unenforceable unless procedural requirements are strictly observed.
Both common law and statute impose limits on how and when termination rights may be exercised, particularly where forfeiture or re-entry is relied upon.
The Central Role of Notice
At common law, contractual termination rights are frequently conditioned on the giving of notice.
Where a contract requires notice specifying the breach and allowing time to remedy, strict compliance is required. Errors in the content or timing of a notice may invalidate an attempted termination of a commercial lease.
The importance of notice is illustrated in Legione v Hateley [1983] HCA 11, where the High Court examined whether a notice of rescission was effective to bring a contract to an end.
The Court observed that the contractual machinery restricted enforcement of termination rights unless notice requirements were met, noting at [1] that:
Neither shall be entitled to enforce any of the said rights and remedies … unless he gives to the other a written notice specifying the default and stating his intention to enforce his rights and remedies unless the default is made good.
Although the case concerned a contract for the sale of land, the principle applies equally to commercial leases where termination rights are conditioned on notice.
Accuracy and Content of the Notice
A termination notice must correctly identify the breach relied upon. However, the High Court has recognised that the inclusion of an incorrect or non-existent default does not necessarily invalidate a notice if a genuine default is also identified.
In Legione v Hateley [1983] HCA 11, the notice of rescission specified both a real default and an alleged default that did not in fact exist. The Court addressed whether this defect invalidated the notice and explained at [7] that:
The notice therefore specified a non-existent default as well as a real default.
The Court ultimately held that the presence of an additional, incorrect allegation did not of itself render the notice ineffective, reinforcing the principle that notices are assessed substantively rather than pedantically, provided the tenant is properly informed of the default relied upon.
Time for Compliance and Opportunity to Remedy
Where a notice allows time for a breach to be remedied, the terminating party must not act inconsistently with that allowance.
Conduct suggesting that time has been extended or that strict compliance is suspended may undermine the termination of a commercial lease.
In Tropical Traders Ltd v Goonan [1964] HCA 20, the High Court examined whether conduct following default affected the right to rescind. Kitto J explained that the vendor could refrain from terminating while leaving the question open, stating at [9]:
It might keep the question open, so long as it did nothing to affirm the contract.
This principle is particularly relevant in commercial leasing where landlords grant temporary indulgences or extensions while considering enforcement options.
Statutory Notice Requirements in Queensland
In Queensland, statutory intervention further regulates the termination procedure. Section 124 of the Property Law Act 1974 (Qld) restricts the enforcement of rights of re-entry or forfeiture unless notice requirements are satisfied, including specification of the breach and provision of a reasonable opportunity to remedy where the breach is capable of remedy.
Section 124(1) says:
(1) A right of re-entry or forfeiture under any proviso or stipulation in a lease, for a breach of any covenant, obligation, condition or agreement (express or implied) in the lease, shall not be enforceable by action or otherwise unless and until the lessor serves on the lessee a notice—
(a) specifying the particular breach complained of; and
(b) if the breach is capable of remedy, requiring the lessee to remedy the breach; and
(c) in case the lessor claims compensation in money for the breach, requiring the lessee to pay the same;
and the lessee fails within a reasonable time after service of the notice to remedy the breach, if it is capable of remedy, and, where compensation in money is required, to pay reasonable compensation to the satisfaction of the lessor for the breach.
While the statute does not displace common law principles, it reinforces the same procedural discipline reflected in the case law: termination without proper notice is vulnerable to challenge, even where a serious breach has occurred.
Consequences of Procedural Non-Compliance
Failure to comply with notice requirements may render a termination ineffective, exposing the landlord to claims for wrongful termination or repudiation.
As the authorities demonstrate, courts focus closely on the process by which termination is effected, rather than merely on the existence of a breach.
The procedural analysis, therefore, forms a critical gateway issue: before a court considers the seriousness of a breach, it will often determine whether termination was attempted in accordance with contractual and statutory procedure.
Relief Against Forfeiture in Commercial Leasing
Even where a commercial lease has been validly terminated for breach, the court may, in appropriate cases, grant relief against forfeiture.
This jurisdiction reflects a long-standing equitable reluctance to allow the loss of a proprietary interest where forfeiture operates as a form of security rather than as an end in itself.
Nature and Source of the Jurisdiction
The modern statement of the jurisdiction is found in Shiloh Spinners Ltd v Harding [1973] AC 691, a decision repeatedly approved by the High Court of Australia.
In that case, Lord Wilberforce traced the historical development of relief against forfeiture and explained that:
… from the earliest times courts of equity have asserted the right to relieve against the forfeiture of property.
His Lordship emphasised that the jurisdiction is not general or unconfined. Equity does not intervene simply because forfeiture produces a harsh result.
Rather, relief is available only in “appropriate and limited cases”, particularly where forfeiture is used as security for performance rather than as a substantive commercial bargain.
This framing is critical in the leasing context, where forfeiture is commonly used to secure compliance with rent and other obligations.
Relief Where Forfeiture Operates as Security
A central organising principle of relief against forfeiture is the distinction between forfeiture as security and forfeiture as bargained-for termination.
In Shiloh Spinners Ltd v Harding [1973] AC 691, Lord Wilberforce explained that equity may intervene where:
… the primary object of the bargain was to secure a stated result which could be effectively attained when the matter came before the court and where the forfeiture provision was added by way of security for the production of that result.
In commercial leasing, this rationale most commonly applies to forfeiture for non-payment of rent, where the landlord’s legitimate interest is ordinarily the receipt of money rather than the repossession of the premises.
Limits on the Relief
The jurisdiction to grant relief is subject to important limits. Courts have consistently refused to grant relief where the breach is wilful, deliberate, or continuing, or where the tenant cannot demonstrate an ability and willingness to remedy the default.
In Shiloh Spinners Ltd v Harding [1973] AC 691, Lord Wilberforce made clear that:
… wilful breaches should only in exceptional circumstances be relieved against.
This limitation has particular significance for breaches involving unauthorised alterations, misuse of premises, or ongoing failure to comply with repair obligations.
Australian Acceptance of the Shiloh Spinners Principles
The High Court of Australia expressly adopted the principles articulated in Shiloh Spinners Ltd v Harding [1973] AC 691 in Legione v Hateley [1983] HCA 11.
In that case, the Court confirmed that the equitable jurisdiction to relieve against forfeiture is confined and does not amount to a general power to rewrite contracts.
Gibbs CJ and Murphy J endorsed the approach taken in Shiloh Spinners v Harding, noting that equity intervenes only where insisting on strict legal rights would produce an outcome inconsistent with the underlying purpose of the bargain.
In doing so, the Court reaffirmed that relief is not available merely because forfeiture would operate harshly.
Interaction with Queensland Statutory Relief
In Queensland, the equitable jurisdiction exists alongside statutory relief mechanisms under the Property Law Act 1974 (Qld).
While the statute expands the availability of relief in some circumstances, it does not displace the underlying equitable principles articulated in Shiloh Spinners Ltd v Harding [1973] AC 691 and adopted in Legione v Hateley [1983] HCA 11.
Accordingly, even where statutory relief is available, courts continue to assess:
- the nature of the breach,
- whether it is capable of remedy,
- the tenant’s conduct, and
- whether forfeiture operates as security or as an agreed commercial consequence.
Practical Significance
Relief against forfeiture represents a critical constraint on termination for breach.
A landlord who terminates a lease without regard to the potential availability of relief risks having the lease reinstated, often on conditions, after incurring high costs and delay.
For this reason, relief against forfeiture remains an essential consideration whenever termination for breach is contemplated in Queensland commercial leasing.
Consequences of Wrongful Termination
Termination of a commercial lease without proper legal justification carries significant consequences.
Where a party purports to terminate a lease in circumstances where no right to do so exists, that conduct may itself constitute repudiation, entitling the other party to elect to treat the lease as at an end and pursue damages.
Wrongful Termination as Repudiation
Australian contract law draws a clear distinction between lawfully justified termination and non-justified termination. Where termination is unjustified, the terminating party risks being characterised as having repudiated the contract.
In Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd [2007] HCA 61, the High Court explained that repudiation may arise not only from words but from conduct, stating that repudiation may refer to, as stated at [44]:
… conduct which evinces an unwillingness or an inability to render substantial performance of the contract.
A landlord who purports to terminate a lease without a valid contractual or statutory basis may therefore be taken to have evinced an intention not to be bound by the lease, exposing itself to the same consequences as any repudiating party.
Acceptance of Repudiation by the Innocent Party
Where one party repudiates a contract, the contract does not automatically come to an end.
The innocent party must elect whether to accept the repudiation. That election has decisive consequences.
In Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd [2007] HCA 61, the High Court emphasised that termination for breach, where permitted, fundamentally alters the parties’ relationship, observing at [46] that:
Termination of a contract in response to breach, where permitted, may alter substantially the allocation of risk accepted by the parties.
If the innocent party accepts a repudiation, the contract is discharged prospectively, and the parties’ rights are thereafter determined by reference to remedies rather than ongoing performance obligations.
See what happened here – Repudiation of a Building Contract – Addinos v OJ Pippin Homes
Damages Following Wrongful Termination
The ordinary remedy for breach of contract is damages. Where a lease is wrongfully terminated, the innocent party may seek damages for loss flowing from the premature ending of the contractual relationship.
In Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd [2007] HCA 61, the High Court reaffirmed that termination is exceptional precisely because damages are usually the primary remedy, stating at [46]:
Leaving to one side remedies of injunction … the ordinary remedy for breach of contract is an award of damages.
This principle is particularly significant in commercial leasing, where wrongful termination may expose the terminating party to claims for loss of bargain, relocation costs, or other consequential losses, subject to the usual principles of causation and mitigation.
It is vital that you get a lease review.
Interaction with Lease Termination for Breach
The High Court has cautioned that termination should not be invoked lightly, as it reallocates commercial risk and may have consequences influenced by external factors, such as market conditions.
As the Court noted in Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd [2007] HCA 61 at [46]:
The consequences of termination for the parties may be affected by external circumstances such as market fluctuations.
This observation underscores why courts scrutinise the validity of termination closely and why landlords must ensure strict compliance with contractual and statutory requirements before purporting to bring a lease to an end.
Practical Significance
The consequences of wrongful termination extend beyond immediate possession disputes.
A landlord who terminates without a proper foundation risks reversing the intended commercial outcome, converting what was intended to be the enforcement of rights into exposure to damages liability.
Accordingly, wrongful termination represents one of the most significant risks in commercial leasing disputes and reinforces the need for careful legal analysis before termination is attempted.
Common Risks and Misconceptions in Terminating Commercial Leases
Disputes concerning termination for breach frequently arise not from uncertainty about the existence of a breach, but from misconceptions about what that breach entitles a landlord to do.
The High Court authorities examined above reveal a recurring pattern of mistaken assumptions that have led to invalid terminations and adverse consequences.
Any Breach Justifies Termination
A common error is the assumption that any breach of a lease, particularly a repeated breach, automatically entitles the landlord to terminate the lease. The High Court has repeatedly rejected this approach.
In Shevill v Builders Licensing Board [1982] HCA 47, the Court emphasised that repudiation is not established lightly, observing at [8] that:
Repudiation of a contract is a serious matter and is not to be lightly found or inferred.
The misconception lies in equating breach with repudiation. As the authorities demonstrate, only breaches that go to the root of the lease or evince an unwillingness to perform will justify termination.
Repeated Default Must Amount to Repudiation
Landlords often assume that repeated late rent payments or ongoing non-compliance must, of itself, justify termination. The High Court has expressly warned against that reasoning.
In Tropical Traders Ltd v Goonan [1964] HCA 20, Kitto J explained that acceptance of non-compliance on earlier occasions does not automatically alter contractual rights, stating:
It is not a valid general proposition that wherever some instalments are accepted late without demur the party accepting them is precluded in respect of later instalments from insisting upon the agreement that time shall be of the essence.
The misconception is assuming that repetition changes the legal character of the breach without regard to context, conduct, or contractual construction.
Accepting Rent is Always Safe
Another frequent error is assuming that acceptance of rent following breach has no legal consequence. In fact, acceptance of rent may amount to an affirmation depending on the period to which it relates.
In Tropical Traders Ltd v Goonan [1964] HCA 20, the Court drew a sharp distinction between payments referable to past performance and those implying continuation of the contract, noting at [11] that:
If the sum had included interest for any period beyond [the due date], acceptance of the payment would necessarily have implied the existence of the contract after that date.
This distinction is often overlooked in practice, exposing landlords to arguments that termination rights have been lost by conduct.
Termination Clauses Override Equity and Statute
A further misconception is that a clearly drafted termination or forfeiture clause can be enforced regardless of equitable or statutory constraints.
In Legione v Hateley [1983] HCA 11, the High Court reaffirmed that equitable principles may intervene even where contractual rights are clear, stating at [18] approving the proposition that:
… courts of equity have asserted the right to relieve against the forfeiture of property.
Queensland legislation reinforces, rather than displaces, this judicial caution by imposing procedural and remedial constraints on forfeiture and re-entry.
Wrongful Termination Is Low Risk
Perhaps the most significant misconception is underestimating the risk of wrongful termination.
Some landlords proceed on the basis that an invalid termination will merely delay enforcement. The High Court has made clear that the consequences may be far more serious.
In Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd [2007] HCA 61, the Court explained that termination reallocates commercial risk and may expose the terminating party to liability, noting at [46] that:
Termination of a contract in response to breach, where permitted, may alter substantially the allocation of risk accepted by the parties.
A wrongful termination may, therefore, transform the terminating party into the party in breach.
Practical Implication
The authorities demonstrate that termination for breach is not a mechanical exercise.
The most common failures arise not from obscure points of law, but from overconfidence in termination rights and underestimation of procedural, equitable, and statutory limits.
Consequences of Non-Compliance with Termination Requirements
Failure to comply with contractual, equitable, or statutory requirements when terminating a commercial lease can expose a landlord to significant adverse consequences.
The High Court authorities demonstrate that non-compliance may invalidate termination, deprive a landlord of enforcement rights, or reverse the legal positions of the parties altogether.
Termination May Be Effective but Limit Remedies
A critical consequence of non-compliant termination is that, even where the lease is brought to an end, the landlord may be unable to recover damages for loss of bargain or future rent.
In Shevill v Builders Licensing Board [1982] HCA 47, the High Court emphasised that the right to re-enter and determine a lease does not necessarily carry with it a right to recover loss of future contractual benefits. Gibbs CJ explained at [15]:
It is one thing to be able to rid oneself of an unsatisfactory tenant; but it is quite another, requiring a clear expression of intention, to be able to hold the evicted tenant liable for whatever damages might be suffered as a result of the premature termination of the tenancy.
Where termination occurs without a sufficient contractual or common law foundation, the landlord may be confined to recovery of accrued rent and damages for past breaches only.
Loss of Loss-of-Bargain Damages
The High Court in Shevill v Builders Licensing Board [1982] HCA 47 made clear that damages for loss of the remainder of the lease term do not flow automatically from termination. His Honour stated at [15]:
Damages do not usually flow from a failure to pay money, the proper recourse being an action for the debt.
Accordingly, where a landlord terminates in reliance on a forfeiture clause without establishing repudiation or breach of an essential term, the commercial consequence may be that termination itself causes the loss, rather than the tenant’s breach.
Termination Can Reverse Commercial Risk
High Court authority also demonstrates that termination reallocates commercial risk and may leave the terminating party bearing losses that would not otherwise have arisen.
In Shevill v Builders Licensing Board [1982] HCA 47, Gibbs CJ observed that re-entry was a drastic step and warned at [15] that:
If it exercised its right of re-entry only in order to apply greater pressure on the tenant with a view to regular payments of rent in the future, it took the risk that the lessee would accept the forfeiture.
That risk materialised in Shevill v BLB, leaving the lessor with vacant premises and no entitlement to loss-of-bargain damages.
Damages Depend on Proper Termination Grounds
By contrast, where termination follows repudiation or fundamental breach, damages for loss of the future benefit of the lease may be recoverable.
In Progressive Mailing House Pty Ltd v Tabali Pty Ltd [1985] HCA 14, the High Court explained at [31] that:
… assuming repudiation or fundamental breach by the defendant, he could no longer be required to perform the contract and is liable for damages for loss of bargain.
However, the availability of such damages depends critically on whether the termination was legally justified at the time it was effected.
Termination Without Entitlement Risks Liability
Finally, Progressive Mailing House Pty Ltd v Tabali Pty Ltd [1985] HCA 14 confirms that termination is not merely a procedural step but a juridical act with substantive consequences. Mason J explained at [32] that:
Termination in the exercise of a contractual power is not an affirmation of the contract … because the termination, so far from insisting on performance by the party at fault, brings to an end his obligation to perform his promise in specie.
Where termination is exercised without proper entitlement, the terminating party risks being characterised as having brought the contract to an end at its own initiative, with the resulting losses attributed accordingly.
Jurisdiction-Specific and Unsettled Issues in Queensland
Although the legal principles governing termination for breach are well established, High Court authority makes clear that their application is frequently conditioned by evaluative judgment, election, and the sequence of events following breach.
This gives rise to uncertainty in Queensland commercial leasing disputes, particularly where termination rights intersect with conduct and timing.
Election and the Risk of Losing Termination Rights
A recurring source of uncertainty is whether a party has lost the right to terminate by failing to elect promptly, or by allowing contractual timeframes to pass. This issue is highly fact-sensitive and resists rigid formulation.
In Foran v Wight [1989] HCA 51, Mason CJ explained the consequence of failing to elect in clear terms, as stated at [21]:
A failure by the innocent party to treat an anticipatory breach of an essential term as a repudiation and to terminate the contract has the effect of leaving the contract on foot, in which event it remains in force for the benefit of both parties.
This passage illustrates why termination disputes in Queensland often turn on timing rather than breach alone.
Whether a landlord has acted too late, or has allowed the lease to continue by inaction, depends on an evaluative assessment of the parties’ conduct as events unfold.
Readiness, Willingness, and Contextual Evaluation
Another unsettled issue concerns the role of readiness and willingness to perform where termination follows breach.
Although often expressed as a requirement, its application depends on the surrounding circumstances, particularly where one party’s conduct has affected the other’s capacity to perform.
In Foran v Wight [1989] HCA 51, Mason CJ emphasised that readiness and willingness are not abstract concepts, stating:
Readiness and willingness imports ability, as well as disposition, to perform.
This formulation underscores that courts must assess factual capacity, not merely asserted intention.
In Queensland commercial leasing disputes, whether a party was truly ready and willing to perform at the relevant time often becomes a contested and uncertain question of evidence.
Consequences of Termination for Accrued and Future Rights
Uncertainty also arises in determining which rights survive termination and which are discharged. While the general principles are settled, their application depends on the nature of the contract and the stage at which termination occurs.
In Queensland, disputes frequently arise over whether payment obligations had accrued prior to termination or were discharged by it.
Termination, Fairness, and Evaluative Judgement
A further area of uncertainty lies in the assessment of fairness following termination. Even where a party is contractually entitled to terminate, courts remain attentive to the consequences of doing so.
In McDonald v Dennys Lascelles Ltd [1933] HCA 25, Starke J articulated a limitation on recovery following termination:
The vendor cannot have the land and its value too.
Although expressed in the context of a sale of land, this principle reflects a broader concern with avoiding over-compensation.
In Queensland commercial leasing disputes, similar reasoning informs judicial scrutiny of claims for both possession and extensive financial recovery.
Practical Uncertainty in Queensland Commercial Leasing
Taken together, these authorities demonstrate that termination for breach involves more than identifying breach and invoking contractual rights. Election, readiness, timing, and the consequences of termination all require evaluative judgment.
Accordingly, while the governing principles are settled, their application in Queensland remains uncertain until the facts are assessed.
When Termination for Breach is Available in Queensland
The termination of a commercial lease for breach in Queensland is governed by a tightly controlled legal framework.
While the concept of breach is often treated in commercial practice as a trigger for immediate enforcement, the authorities demonstrate that termination is an exceptional remedy, not an automatic one.
Whether termination is available depends on a structured inquiry that considers:
- the character of the breach, including whether it is essential or repudiatory.
- the terms of the lease, including the scope and construction of any express termination or forfeiture rights.
- statutory constraints, particularly those regulating notice, opportunity to remedy, and relief against forfeiture.
- the conduct of the parties, including delay, acceptance of performance, and representations made after breach; and
- the consequences of termination, including the risk of wrongful termination, loss of remedies, or exposure to damages.
High Court authority consistently cautions against treating termination as a purely contractual or mechanical exercise.
Instead, courts assess termination disputes through the lens of construction, equity, and evaluative judgment.
This is particularly so in Queensland, where statutory intervention operates alongside common law and equitable principles to moderate the consequences of forfeiture.
The practical result is that termination for breach remains one of the most legally consequential steps a landlord can take.
Even where a serious breach has occurred, failure to comply strictly with contractual and statutory requirements or mischaracterisation of the tenant’s conduct may invalidate termination or reverse the parties’ legal positions.
Accordingly, the question is: when can a commercial lease be terminated for breach in Queensland? cannot be answered by reference to breach alone.
It requires careful analysis of the lease, the nature of the default, the surrounding conduct, and the applicable statutory and equitable controls.
Outcomes will often turn on fine factual distinctions rather than bright-line rules.
Frequently Asked Questions – Terminating a Commercial Lease
The following FAQs address common questions about terminating a commercial lease for breach in Queensland.
They summarise how contractual terms, statutory controls, and equitable principles interact in practice, and why outcomes often depend on careful factual and procedural analysis.
When can a commercial lease be terminated for breach in Queensland?
A commercial lease can be terminated only if the breach justifies termination under the lease, common law (such as repudiation or breach of an essential term), and any applicable legislation. Not every breach allows termination, and procedural and statutory requirements must usually be satisfied before termination is effective.
Can a landlord terminate a lease immediately for non-payment of rent?
Not automatically. While non-payment of rent is a breach, it does not always justify immediate termination. Whether termination is available depends on the lease terms, the seriousness and persistence of the default, and compliance with statutory notice requirements, including those under Queensland property legislation.
What is a repudiatory breach in a commercial lease?
A repudiatory breach occurs where a party’s conduct shows an unwillingness or inability to perform the lease in a substantial respect. It focuses on future performance, not just past defaults. Only repudiatory conduct (or breach of an essential term) gives rise to a common law right to terminate.
Does a termination clause in the lease guarantee termination rights?
No. Termination clauses are strictly construed and operate alongside statutory and equitable limits. Even where a lease permits termination, failure to comply with notice requirements or statutory controls may render termination invalid or expose the landlord to relief against forfeiture.
Is notice always required before terminating a commercial lease?
In most cases, yes. Queensland legislation restricts the enforcement of forfeiture or re-entry rights unless notice requirements are satisfied, particularly where the breach is capable of remedy. Failure to give proper notice can invalidate the termination.
Can accepting rent after a breach prevent termination?
It can. Accepting rent or otherwise treating the lease as continuing after a breach may amount to affirmation, depending on the circumstances. This may result in the landlord losing the right to terminate for that breach.
What is relief against forfeiture?
Relief against forfeiture is an equitable (and sometimes statutory) remedy allowing a court to reinstate a lease despite termination. It is commonly granted where forfeiture operates as security (such as for rent) and the breach is capable of remedy. Relief is discretionary and fact-dependent.
What happens if a landlord terminates a lease wrongfully?
Wrongful termination may itself amount to repudiation. If the tenant accepts that repudiation, the landlord may be exposed to damages, lose termination rights, or face reinstatement of the lease. Termination can therefore reverse the intended commercial outcome.
Can a landlord claim future rent after terminating a lease?
Not automatically. Whether future losses are recoverable depends on the legal basis for termination. Termination based solely on forfeiture may not entitle a landlord to loss-of-bargain damages unless repudiation or an essential breach is established.
Are termination outcomes predictable in Queensland?
Often no. While the principles are settled, outcomes depend heavily on facts, conduct, timing, and statutory compliance. Relief against forfeiture, election, and repudiation involve evaluative judgment, meaning similar breaches can produce different results in different cases.
