Attention landlords: New tobacco laws mean new termination rights. From 1 October 2025, retail shops selling cigarettes and vapes must hold or apply for a valid tobacco licence. If not, landlords can now terminate their retail lease. This is part of the government’s crackdown on illicit tobacco sales.
If you have a tenant who sells smoking products, you should check if they have been granted a licence to operate their store. You can ask tenants for proof of their current licence on a regular basis to ensure they are complying with tobacco laws. These changes, enacted by the Tobacco Legislation (Closure Orders) Amendments Act 2025, apply to all current leases and licences to occupy premises, regardless of when they started.
A tenant who breaches the tobacco laws can be ordered to close their store for up to 90 days by NSW Health, or up to 12 months by the Local Court. This includes tenants who sell tobacco products or non-tobacco smoking products without a valid licence and tenants who are not pharmacies but illegally sell vapes. Such tenants can face up to $880,000 in fines.
If a closure order is issued, you as the landlord will be notified by NSW Health and told who is allowed to enter the premises during the closure period. You will then have the right to terminate the Lease, giving 28 days’ notice to the tenant, while the closure order is in effect.
If you choose to terminate, the tenant is not entitled to bring proceedings against you because of the termination or to access dispute resolution. You will also not be liable for damages or compensation because of such termination. You may choose to hold off on termination, for example, if a tenant is working towards obtaining a licence. But be careful not to turn a blind eye to non-compliant trading, as this itself could be deemed an offence in the future and attract a financial penalty.
For landlords, terminating a lease is not only inconvenient in finding a new tenant, but also costly in losing rent and incurring new lease expenses. However, if you terminate while a closure order is in effect, you can claim damages from the tenant. This includes lost rent until the tenant is replaced and new lease preparation costs. In legal terms, the tenant is treated as if they have repudiated the lease.
When granting a lease for a shop selling tobacco products, you should ensure the lease:
Even though the right to termination is deemed a term of the Lease, it is best to have it clearly spelled out, together with your additional rights, to protect your interests and avoid a dispute.
If you need help preparing a lease for a tenant selling tobacco products or advice about terminating a lease affected by a closure order, contact our property law team and speak with Taylor Dand.
