Lease changes can disrupt any hospitality business. Demolition and relocation clauses are common in commercial leases, yet many operators don’t fully understand their legal rights or the risks these clauses pose.
To help, GSE has partnered with JSP Legal, a Canberra-based law firm with experience advising hospitality tenants on commercial and retail leasing matters.
Below is a practical guide to what demolition and relocation clauses mean and how hospitality tenants can protect their businesses.
What Are Demolition and Relocation Clauses?
Demolition Clauses
These allow a landlord to terminate your lease if they intend to repair, renovate, or reconstruct the building containing the premises, which cannot be carried out practicably without the premises being vacant.
Relocation Clauses
These allow a landlord to require your business to move to another premises within the same building or development if they intend to repair, refurbish, redevelop or extend the building, which cannot be carried out practicably without the premises being vacant.
Both clauses can significantly impact a hospitality venue’s operations, staffing, cash flow, and overall business value.
Your Rights Under ACT Legislation
In the ACT, the Leases (Commercial and Retail) Act 2001 (ACT) provides strong protections for tenants.
1. Landlords Must Give Proper Written Notice
A valid demolition or relocation notice must clearly outline:
- The nature of the proposed works
- The expected timeframe
- Evidence that the works are genuine
- Details of any alternative premises (for relocation)
A demolition notice must be given at least 3 months before the intended termination date if the lease is for a term up to 1 year, or at least 6 months before the intended termination date in any other case.
A relocation notice must be given at least 3 months before the intended relocation date, with an offer to provide alternative premises.
2. Redevelopment Must Be Genuine
Landlords must demonstrate that the proposed works are real, planned, and substantial. Vague or speculative intentions are not sufficient under ACT law.
3. You May Be Entitled to Compensation
Compensation may include:
- Relocation and fit-out costs
- Losses caused by business disruption or downtime
- Staff transition costs
- Signage, branding, and marketing updates,
But in working out the amount for the compensation, regard must be had to any concession already given to the tenant because of such right reserved by the landlord.
These compensation rights are built into ACT legislation and cannot be excluded or ignored.
4. New Premises Must Be Comparable
If relocation is required, the alternative premises offered to the tenant must be comparable to the current premises overall (ie. as to the size, location and customer traffic, and otherwise overall available state of operation).
5. You Can Dispute Unreasonable Notices
If a demolition or relocation notice, proposed terms, or redevelopment plans appear unfair, unclear, or unreasonable, tenants can seek legal review and pursue dispute resolution. JSP Legal regularly assists tenants in assessing notices, negotiating outcomes, and enforcing their statutory rights.
Considerations for Hospitality Tenants Nationally
While this blog focuses on the ACT, similar demolition and relocation clauses appear in leases across Australia. Redevelopment risk is common in major metropolitan areas, and both hospitality tenants and buyers should understand how these clauses can affect:
- Lease security
- Business value
- Settlement of a sale
- Fit-out and compensation obligations
GSE frequently sees delays or complications in hospitality business sales where these clauses have not been properly reviewed or addressed early.
How Hospitality Tenants Can Protect Themselves
1. Review the Lease Before Signing
Have a solicitor review notice periods, compensation provisions, and relocation conditions before entering the lease.
2. Document Your Fit-Out
Detailed records and invoices make compensation claims far easier to substantiate.
3. Get Legal Advice Immediately If You Receive a Notice
Timely legal advice can significantly improve your position and outcome.
4. Consider the Impact on Business Sales
Demolition and relocation clauses can materially affect valuation, buyer confidence, and settlement timelines.
5. Negotiate Where You Can
Tenants can often negotiate:
- Increased compensation
- Longer notice periods
- Alternative relocation arrangements
- Clear requirements that any new premises are genuinely comparable
GSE & JSP Legal: Here to Help
Whether you’re negotiating a new lease, responding to a demolition or relocation notice, or preparing to sell your hospitality business, early advice is critical.
- GSE Hospitality Brokers assesses the commercial and transactional impacts
- JSP Legal provides clear, practical, ACT-focused legal advice on leasing and redevelopment risks
Together, we help ensure your hospitality business is protected.
