Your lease option deadline is coming up: renew, move or wait?

An option to renew is one of the few deadlines in business that doesn’t move. Miss it and the landlord no longer has to offer you anything. Exercise it and you’re usually committed for years. In both cases the decision is really about timing: when to decide, when to commit and when to spend.

This guide is for business owners who’ve just opened the lease, found the option clause and realised the window is closer than they thought.

What is a lease option deadline, exactly?

An option to renew gives you, the tenant, the right to extend for a further term, such as the second “5” in a “5 + 5” lease. To use it, you have to give notice within a set window and in the way the lease says. The Queensland Small Business Commissioner notes that options usually need to be exercised “between 3 to 6 months prior to the end of the Lease”, and warns that getting it wrong can cost you the right to renew. (QSBC)

Three things to pull out of your lease today:

Check	Why it matters
The first and last date you can exercise	Notice given too early can be as invalid as notice given too late
How notice must be given (in writing, to which address, signed by whom)	A defective notice is one of the most common ways options are lost
Conditions on the option, such as no unremedied breaches or rent paid on time	A rent arrears problem in the final year can put the renewal at risk

Write the last date in your calendar, then add a reminder a month before it.

Will the landlord remind me?

Don’t count on it. The rules vary:

• Victoria (retail leases): the landlord must give written notice at least three months before the last date to exercise the option. (VSBC)
• Queensland (retail shop leases): the landlord must tell you the option date at least two months ahead, but QSBC notes there are no penalties if they don’t.
• Non-retail commercial leases and some other states may carry no reminder obligation at all.

Treat the date as yours to manage. If your lease is retail and you’re unsure what applies, your state small business commissioner is a free first call.

When should I start deciding?

Roughly six to twelve months before the lease ends, which QSBC also suggests. Working back from the last exercise date:

1. Last date to exercise — notice is served and you have proof of delivery.
2. Two to four weeks before — final decision; notice drafted and checked.
3. One to three months before — rent position known; alternative sites inspected and costed.
4. Three to six months before — fit-out or relocation quotes in hand; finance conversation started if either path needs funding.

If you’re reading this in October with a window that closes in January or February, Christmas trade and the summer shutdown will eat a chunk of that time. Our guide to working back from your deadline walks through the method in more detail.

How do I price staying against moving?

Use dollars against dollars, over the same period. That’s usually the length of the option term. Leave rates out of it and compare total costs.

Staying costs:

• the new rent across the term (find out how it will be set; renewals usually follow the lease’s rent review clause);
• any fit-out refresh needed to stay competitive;
• outgoings changes you can see coming.

Moving costs:

• the new rent across the same term;
• the full fit-out at the new site, plus signage, IT and permits;
• make-good at the old site (returning it to the condition the lease requires);
• bond or bank guarantee at the new site;
• trading downtime during the move, priced as lost profit;
• the risk that some customers don’t follow you.

The cost-of-waiting calculator helps with the lost-profit and downtime pieces.

Illustrative example: the refill shop with a January deadline

Illustrative only. Invented business and figures.

A refill and homewares shop is in year five of a 5 + 5 lease. The last date to exercise the option is 31 January. Rent is $54,000 a year. The landlord’s agent has indicated that a market review would put it at around $63,000.

A vacant shop two streets away is offered at $50,000 a year, but it’s a bare shell.

Over the next five years	Stay and exercise	Move
Rent	$315,000	$250,000
Fit-out	$35,000 (refresh)	$120,000 (full)
Make-good at old site	—	$18,000
Downtime (three weeks of lost profit)	—	$12,000
Bond or guarantee	Existing	$12,500 (held, not spent)
Total cost	$350,000	$400,000

Even with $65,000 less in rent, moving costs about $50,000 more over five years, and that’s before any customers who don’t make the trip. On these numbers the owner exercises the option and keeps the refresh small.

Now change one input. Suppose the market review comes back at $72,000. Staying rises to $395,000, and the gap almost closes. That’s why knowing the rent number before the deadline matters more than anything else in this decision.

If either path needs funding, the next step is to see what options suit your situation. It’s a 60-second enquiry, and it won’t affect your credit file.

Why does fit-out timing trip owners up?

The most expensive timing mistake is spending before the term is locked in. An owner refits with 14 months to run, assumes the option is a formality, then has a dispute over a breach or misses the notice window. The new counters stay behind.

The better sequence:

1. Exercise the option first (or sign the new lease), with proof of notice.
2. Then commit to the fit-out, sized to the term you’ve secured.
3. Time the works for your quietest weeks. For most retailers that’s not November or December. Our quiet-season upgrades page covers how to pick the window.

There’s a tax timing layer too. Eligible small businesses can generally write off assets costing less than $20,000 each in the year they’re first used or installed ready for use, so equipment within a fit-out can be timed either side of 30 June. Built-in structural works are treated differently, so ask your accountant how your quote splits. (ATO)

When is waiting the smarter call?

You can’t wait past the deadline. But there are good reasons not to commit to the bigger spend yet:

• The business case for the new site isn’t proven. If moving relies on footfall you haven’t tested, a renewal plus a modest refresh buys time to gather evidence.
• Trading is volatile. If the last two quarters swung hard, locking in a large fit-out loan on top of a new five-year commitment may be too much at once.
• The landlord will negotiate. Sometimes a shorter renewal or a holdover arrangement is on the table, but get it in writing before the option window closes, never after.
• The cheaper fix works. A layout change or new shelving might deliver most of the benefit of a full refit.

Our page on when waiting is smarter covers the general signals. The point here: deciding not to spend yet is fine; letting the option lapse by default isn’t.

What if I’ve already missed the window?

Act quickly and in writing. Depending on your state, lease type and how the landlord handled notices, you may have more room than you think. In Victoria, for example, the deadline can be extended where the landlord hasn’t given the required notice. Elsewhere you may be negotiating a new lease from scratch. Contact your state small business commissioner and a leasing lawyer before you sign anything new. And if a move is now likely, start pricing it immediately using the table above. The expand now or wait page helps if the move is also a chance to grow.

How do businesses fund the stay-or-move decision?

The common funding needs are:

• a fit-out or refresh after exercising the option;
• relocation costs, including fit-out, make-good and the bond or guarantee, which can all land in the same few weeks;
• working capital to carry the business through a move or a slower ramp-up at a new site.

For trading businesses, unsecured and cash-flow facilities typically run from $5,000 to $500,000, sized on turnover and bank statements. Larger projects can use property-secured loans from $20,000 to $5,000,000. Past credit issues and ATO debt are looked at case by case.

Lock in the lease, then line up the money

Lease deadlines are a good reason to sort your finance early. Once you’ve exercised the option or signed the new lease, the fit-out quotes, make-good bill and bond tend to arrive together. You don’t want to be scrambling while trying to keep the doors open.

Our enquiry takes about a minute and there’s no credit check when you first enquire. We don’t pass your details around a pile of lenders, so your phone won’t light up with strangers. A real person looks at your lease timeline and your numbers, then calls you to talk through whether funding now makes sense or whether it’s better to hold off. Please fill the form in accurately, including the amount, what it’s for and your key lease dates, so the first option we suggest is the right one.

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