Lease Extension Australia 2025: Rules, Trends & Key Advice

As Australia’s rental market continues to evolve in 2025, lease extensions have become a critical talking point for tenants and landlords alike. With rental vacancy rates at historic lows and state-by-state reforms reshaping tenant rights, understanding the nuances of extending a lease is more important than ever. Whether you’re a renter seeking security or a property owner looking to retain reliable tenants, getting across the latest trends and legal updates can help you make smarter decisions.

Why Lease Extensions Matter in 2025

Australia’s housing landscape has shifted significantly in recent years. In major cities like Sydney and Melbourne, vacancy rates remain below 2%, while regional areas see continued demand as remote work endures. Against this backdrop, lease extensions offer:

• Stability for tenants: Avoid the stress and expense of moving in a tight market.

• Security for landlords: Retain good tenants and minimise costly vacancy periods.

• Negotiation leverage: Both parties may be able to negotiate favourable terms, such as rent adjustments, upgrades, or flexible break clauses.

In 2025, many tenants are proactively seeking extensions months before lease expiry, aware that finding alternative accommodation can be challenging and expensive.

Key Lease Extension Rules and Reforms

Rental legislation is never static, and 2025 has brought new policy changes across several states:

• NSW: Under reforms effective January 2025, tenants can now request a lease extension in writing up to 90 days before the end of their fixed-term agreement. Landlords must respond within 21 days, or the lease rolls into a periodic agreement by default.

• Victoria: New rules limit rent increases during a lease extension to once every 12 months, even if the extension is for a shorter term. Tenants also have the right to request minor modifications as part of the negotiation.

• Queensland: The Residential Tenancies Authority now recommends digital lease extension templates and encourages parties to formalise any extension in writing to avoid disputes.

It’s essential to check the latest legislation in your state, as penalties for non-compliance have increased, and informal or verbal extensions may not be legally binding.

Negotiating Your Lease Extension: Tips and Traps

Whether you’re a tenant or landlord, negotiation is at the heart of any lease extension. Here’s how to approach it strategically:

• Start Early: Begin discussions at least 2-3 months before the lease ends. This gives both parties time to negotiate and, if needed, explore alternatives.

• Know Your Market: Use current market data (such as CoreLogic’s 2025 rental report) to justify your position—whether arguing for stable rent or a reasonable increase.

• Put It in Writing: Always formalise the extension through a signed addendum or new lease agreement. This protects both parties and ensures clarity on key terms.

• Discuss Upgrades: Tenants may request improvements (such as air conditioning or security screens) as a condition of extending. Landlords can use this as leverage for a longer commitment.

• Consider Flexibility: In uncertain times, adding break clauses or options to renew can benefit both parties.

Common traps include assuming the lease will automatically extend (it may default to a periodic agreement, which can be ended on short notice) or failing to update rent payment details after an extension.

Real-World Examples: Lease Extensions in Action

Example 1: Sarah, a tenant in Brisbane, secured a 12-month extension after providing her landlord with comparable rental listings showing a 10% rise in local rents. Both agreed to a moderate rent increase and a new air conditioning unit.

Example 2: John, a Melbourne landlord, proactively offered his tenants a 6-month extension at current rent in exchange for minor repairs, avoiding a vacancy and costly re-letting fees.

These cases highlight how open communication and a clear understanding of the law can create win-win outcomes.

The Future of Lease Extensions

With the Australian rental market likely to remain competitive through 2025 and beyond, lease extensions will continue to be a key strategy for stability. Expect further digitalisation of the process (with more agents offering e-signature options) and ongoing debate around fair rent increases and tenant protections.