Getting Out of a Commercial Lease Early

Even with the best of intentions, there are times when you need to end your commercial lease early. Whether it be for business reasons, relocation, or irreconcilable differences with your landlord, getting out of a commercial lease is not always simple.

Some leases are created with a clause that gives you specific instructions on what to expect if you do need to end your lease early. These typically include things like a sixty-day notice or the ability to sublet until your lease has ended.

Steps To Take

When you realize it is time to break your lease, there are a number of steps you need to take. Because this has the ability to become a sticky situation, you may wish to find a real estate lawyer. Working with a lawyer takes the guess work out of what is legal and what is not. It also ensures that you are maximizing your rights as a tenant and not missing any important clauses in your lease that let you terminate early.

  1. Talk With Your Landlord

The first thing you need to do is to talk with your landlord. Having an honest conversation on why you need to terminate your lease can help the make the process run more smoothly. People are generally more acceptable to change when the other person is coming to them first, rather than hearing it from someone else or through a non-personal approach.

  1. Try to Negotiate A Termination Clause

The best-case scenario is to find a termination clause that suits both parties. Often times this will mean a larger sum of money is paid out by the tenant, but it gets you out of the lease.

  1. Get Everything in Writing

If there is something that is agreed upon during your conversation with your landlord, it is essential that you get it in writing. Without a contract outlining your agreed upon termination requests, the landlord can come back to you as if the meeting never happened. Having everything put in writing protects you if something were to happen.

Termination Clauses

The very first thing you should do when considering breaking your commercial lease is to actually read the lease. Chances are there are several ways you may be able to get out of your lease, and they are more than likely outlined right there in your initial contract.

If they aren’t in the lease, there are still plenty of ways that your landlord may be agreeable to terminating the lease early. This is especially true if your business is succeeding and you need more space, or you need to relocate to another area completely. Even commercial property owners understand that life happens, and sometimes unforeseen changes need to be made, which is why open communication is so important.

The first one, although not the most popular opinion for tenants, is to buy the lease out. That is simply  paying the balance of money that is due on the rest of the lease but still being able to hand over the keys and end the contract early. This is a great option if you don’t have a lot of time left on your initial lease. Longer leases that span over many years may save you money month-to-month but could be detrimental if you need to terminate early. Paying the landlord out for your lease satisfies your obligation in the same way as staying would, but also incentivizes them to let you out early.

Another option is to sublet your space. Finding another company to take over and retain the space but pay the landlord for the remainder of the lease can be a great financially for the tenant. Subletting really only costs the tenant the time and any search costs associated with finding good subletters. Landlords are usually open to this idea since they get to retain their monthly income and the space is still occupied, although they will most likely want a say in who you can sublet to.

Judge and Jury

The final way to break your lease is the least amicable way but can unfortunately be a necessity occasionally – to invoke your state or local government’s termination clause. When this happens, it is usually because the landlord has not held up to their responsibilities.

Landlords are required to maintain the property as outlined in the lease. This can often include paying utilities and taxes on the property, as well as lawn and parking lot care. If any of these things are not regularly done, the tenant has the right to break the lease.

However, this does not mean you can simply stop paying, pack up your belongings, and move on. Instead, you would need to take the landlord to court. This is when it is imperative that you have a lawyer representing you and helping you walk through the steps.

If you are facing a situation that is going in this direction, you should be keeping a careful record of everything in the lease that is not being upheld. A judge may just rule for the landlord to step it up and you will need to show that you will benefit from terminating the lease with no financial recourse.

Always Have a Lawyer To Protect You

The hope when signing a lease is that you will be able to fulfil your obligation of staying and paying rent for the entire duration of the lease. Sometimes life has other plans and that can’t happen. With open communication, most landlords will settle on an agreeable way to let you out of the lease early, even if your contract doesn’t have an early termination clause.

Occasionally you will have to take on your landlord in court to get out of your lease due to bad circumstances, but that is the exception and not the norm.

Even if everything is amicable throughout the process, it can be a great resource to have legal counsel on your side to walk you through the process and make sure you are well taken care of through the lease termination.

Speak Your Mind