From Handshakes to Hard Copies: Do Commercial Leases Need to Be in Writing?

The short answer is it depends.

While informal lease agreements may arise from mutual trust and verbal commitments, such "handshake deals" often lack the legal enforceability required under the Property Law Act 2023 (Qld) (“the Act”).

Pursuant to s 8 of the Act, the creation of a legal or equitable interest in land must be in writing and signed by the person creating the interest. This section of the Act aligns with the broader principle that written documentation ensures clarity and reduces disputes.

What are the consequences of non-writing?

Absent writing (where required), a purported lease or contract to grant a lease may be unenforceable or may only create an interest at will (i.e. a tenancy at will) under the Act. Section 9 states that an interest in land created by parol (not in writing and signed) has the effect of an interest at will only.

Are there any exceptions?

The Act however provides an exception to the above. The exception is if the lease is considered a short lease.

A short lease means —

1. a lease for a term of not more than 3 years, including, for example, a lease created by parol taking effect in possession; or
2. a tenancy from year to year or a shorter period.

Therefore, a short lease may be valid, even if not in writing, if it meets the above statutory definition of a short lease.

Conclusion

Despite the term of your lease, whether it is a long lease (i.e., beyond what might qualify as a short lease), or a short lease, we always recommend reducing that handshake deal to writing.

Why a written agreement is still recommended: -

1. clarity & certainty: A written lease prevents misunderstandings by clearly outlining the terms, responsibilities, and conditions of the lease.
2. evidences an agreement: a written lease serves as clear evidence of the agreed-upon conditions
3. avoids unforeseen issues: a well-drafted lease can cover important details that an oral agreement, or handshake deal might miss, such as security bonds, insurance, make-good obligations, and common area usage.

If you are contemplating entering a lease, please phone our office on 07 4417 4417 to discuss the arrangement and the benefits of having it put to writing at the right end of the transaction.