When a deed of variation is used
A deed of variation changes the terms of an existing lease while the lease itself continues. Common reasons are:
- rent relief, such as a temporary reduction, a deferral or a waiver of arrears;
- adding an area to the premises, or giving one back;
- a change of permitted use as the tenant’s business changes;
- a change to the term, an option or the rent review clause; and
- adding, replacing or releasing a guarantor, or changing the security.
A deed binds the parties without any argument about whether each has given something in return. It should be signed by the landlord, the tenant and every guarantor, and confirm that the lease otherwise continues unchanged. For rent relief, say whether rent is reduced, deferred or waived, what happens if the tenant defaults, and whether the relief changes the figure the next rent review starts from.
Variation or new lease?
Most changes, such as to the rent or the tenant’s obligations, vary the existing lease. But under the general law, a change that extends the term or adds premises may operate as a surrender of the old lease and the grant of a new one. The label on the document does not decide it.
The consequences can be significant. In a 2011 decision, VCAT held that a deed of variation that extended a 1998 lease by 10 years and changed the rent amounted to a surrender and re-grant. The new lease was governed by the Retail Leases Act 2003 (Vic), so the tenant was not liable for the landlord’s land tax and could recover amounts it had paid within the limitation period.
The Transfer of Land Act 1958 (Vic) draws a similar line for registered leases. A registered variation may change the lease’s covenants or conditions, but a variation for this purpose does not include a change to the term, the area of the leased land or the parties (s 67A).
Retail leases: renewal or new lease
If a variation creates a new retail lease, the Act treats it as a lease entered into at that time. That can mean:
- whether the Act applies is asked again, because retail status is tested when a lease is entered into or renewed (s 11(2)), so a lease may come into the Act or fall outside it, for example where occupancy costs now exceed $1 million a year, excluding GST;
- the landlord must give the information brochure and the proposed lease when negotiations start, and a disclosure statement at least 14 days before the new lease is entered into, with the tenant’s remedies if it does not (ss 15 and 17);
- the 5-year minimum term applies, unless the tenant obtains a waiver certificate (s 21); and
- the landlord cannot recover its costs of negotiating, preparing or executing the lease, or of obtaining a mortgagee’s consent to it (s 51).
An extension may instead be a renewal. An agreement by all the parties to renew the lease for a further term on substantially the same terms, except as to rent, is a renewal under the Act (s 9(1)(b)). The landlord must then give a renewal disclosure statement within 14 days after the agreement (s 26). The full disclosure process for a new lease does not apply, and nor does the 5-year minimum if there is no break in possession (ss 9(3), 15(2) and 21(3)). See disclosure statements.
Where there is no new lease, the Court of Appeal has held that a retail lease does not drop out of the Act during its term merely because occupancy costs later rise above the threshold (Verraty). Whether a variation short of a new lease can reopen the question is not settled. See when the Retail Leases Act stops applying.
Two further rules apply to any variation of a retail lease. A landlord must not seek or accept key money, which the Act defines to include a premium for agreeing to a variation (ss 3 and 23). And a new rent review clause must use one of the bases the Act allows (s 35). For the wider rules, see our guide to the Retail Leases Act.
Guarantors and security
Under the general law, a guarantor may be released if the lease is varied without the guarantor’s consent in a way that is substantial or prejudicial to the guarantor, unless the guarantee allows variations (Ankar). Many lease guarantees do allow them, but relying on that is a risk. The safer course is to make every guarantor a party to the deed and have them confirm that the guarantee extends to the lease as varied, including any extended term.
Check the bank guarantee too. A higher rent may call for a larger guarantee under the lease, and a guarantee with a fixed expiry date may need replacing if the term is extended. See security deposits and guarantees.
Mortgagee consent and registration
- Mortgagee consent. Many mortgages require the lender’s consent to a new lease, a variation or a surrender. Get it before signing, or make the deed conditional on it.
- Registered leases. A lease of freehold land for more than 3 years can be registered (TLA s 66). A registered variation of the covenants or conditions is lodged in the approved form, with the landlord’s written consent (s 67A). Changes to the term, the area or the parties cannot be registered as a variation, so they need to be documented another way, for example as a new lease.
- Unregistered leases. Registered land is held subject to the interest of a tenant in possession, other than an option to purchase (TLA s 42(2)(e)). Registration is still worth considering for a long lease.
How we help
- A free 15-minute phone call about the change you want to make.
- Advice on whether the change is a variation, a renewal or a new lease, and what the Retail Leases Act then requires.
- Preparing or reviewing the deed of variation, including rent relief terms and guarantor confirmations.
- Disclosure statements for a renewal or new lease, and registration on the title.
Common questions
Can’t see your question? Call 1800 776 529 or send us a message.
A deed signed by the landlord, the tenant and usually the guarantors that changes some terms of an existing lease, such as the rent, the premises or the permitted use, while the rest of the lease continues.
It can be documented that way, but an extension of the term may operate in law as a surrender and the grant of a new lease. Under a retail lease it may also be a renewal or a new lease for the Act’s purposes, each with different disclosure obligations, so get advice before you sign.
They should. A variation made without a guarantor’s consent may release the guarantor, unless the guarantee allows variations. Having every guarantor sign and confirm the guarantee avoids the argument.
A retail landlord must not seek or accept key money, which includes a premium for agreeing to a variation where there is no real consideration for it. Whether its legal costs can be passed on depends on the circumstances, including whether the variation amounts to a new lease.
Law referred to
- Retail Leases Act 2003 (Vic) ss 3 (definition of key-money), 9, 11(2), 15, 17, 21, 23, 26, 35 and 51.
- Transfer of Land Act 1958 (Vic) ss 42(2)(e), 66 and 67A.
- Ankar Pty Ltd v National Westminster Finance (Australia) Ltd (1987) 162 CLR 549.
- Verraty Pty Ltd v Richmond Football Club Ltd [2020] VSCA 267.
Last reviewed: October 2026, by a Victorian solicitor with a current practising certificate. This page is general information about Victorian law as at October 2026. It is not legal advice about your lease.
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