UNDERSTANDING THE TERMS OF YOUR LEASE AGREEMENT
The first step to getting out of a commercial lease is to understand the terms and conditions of your lease agreement. You should review your lease carefully and look for clauses that may allow you to terminate the lease early or limit your liability in case of termination. Some of the clauses you should look for are:
- Early termination clause: This is a clause that gives you the right to end the lease early by paying a fee or meeting certain conditions. For example, some leases may allow you to terminate the lease if you give a notice period, pay a penalty, or find a replacement tenant.
- Assignment clause: This is a clause that allows you to transfer your lease rights and obligations to another tenant, subject to the landlord’s approval. This way, you can get out of the lease without paying rent for the remaining term, as long as the new tenant pays rent and complies with the lease terms.
- Sublease clause: This is a clause that allows you to sublet part or all of your premises to another tenant, subject to the landlord’s approval. This way, you can reduce your rent burden by sharing it with another tenant, while still retaining some control over the premises.
- Force majeure clause: This is a clause that excuses you from performing your lease obligations in case of unforeseen events that are beyond your control, such as natural disasters, wars, or pandemics. This clause may allow you to terminate the lease or suspend rent payments if such events make it impossible or impractical for you to use the premises.
If your lease does not have any of these clauses, or if they are not favorable to you, you may still be able to negotiate with your landlord to end the lease early. However, this will depend on your relationship with your landlord, the market conditions, and your bargaining power.
Steps to Review Before Terminating a Commercial Lease
If you have decided to terminate your commercial lease early, you should follow these steps to minimize your risks and costs:
Communicate with your landlord
The first thing you should do is to talk to your landlord and explain your situation and reasons for wanting to end the lease early. You should be honest and respectful, and try to find a mutually beneficial solution. You may be able to persuade your landlord to agree to a lease termination, especially if you have a good relationship with them, or if you can offer them something in return, such as finding a new tenant, paying a lump sum, or leaving the premises in good condition.
Review your options
If your landlord is not willing to terminate the lease, you should review your options and see if you can use any of the clauses mentioned above, such as early termination, assignment, sublease, or force majeure. You should also check the local laws and regulations that may apply to your situation, such as consumer protection laws, landlord-tenant laws, or COVID-19 relief measures. You may be able to find some legal grounds or remedies that can help you get out of the lease or reduce your liability.
Seek professional advice
Terminating a commercial lease can be a complex and risky process, so it is advisable to seek professional advice from a lawyer, an accountant, or a commercial real estate broker. They can help you understand your rights and obligations, negotiate with your landlord, draft a termination agreement, or represent you in court if necessary.
Whatever you do, make sure you document everything in writing. This includes any communication with your landlord, any agreements or contracts you sign, any payments you make or receive, and any evidence or proof you have to support your case. This will help you avoid any misunderstandings, disputes, or lawsuits in the future.
What to Do if Your Landlord Refuses Lease Termination
If your landlord refuses to terminate your lease early, or if you cannot reach an agreement with them, you may have to resort to more drastic measures. However, you should be aware of the potential consequences and risks involved. Some of the things you can do are:
- Stop paying rent: You may be tempted to stop paying rent as a way to force your landlord to terminate the lease or negotiate with you. However, this is a risky move that can backfire on you. If you stop paying rent, you will be in breach of your lease agreement, and your landlord can take legal action against you. They can sue you for the unpaid rent, evict you from the premises, seize your security deposit, or report you to credit bureaus. This can damage your reputation, your credit score, and your ability to rent another space in the future.
- Abandon the premises: You may also be tempted to simply pack up and leave the premises without telling your landlord or fulfilling your lease obligations. However, this is also a risky move that can have negative consequences. If you abandon the premises, you will still be liable for the rent and other charges until the end of the lease term, or until your landlord finds a new tenant. Your landlord can also sue you for breach of contract, damages, or lost profits. Moreover, you may lose your personal property or equipment that you leave behind, as your landlord may have the right to dispose of them or sell them to recover their losses.
- File for bankruptcy: If you are facing severe financial difficulties and have no other way out, you may consider filing for bankruptcy as a last resort. Bankruptcy can help you discharge some of your debts, including your lease obligations, and give you a fresh start. However, bankruptcy is not a quick or easy solution. It can have serious and long-lasting effects on your business and personal finances. It can also affect your relationship with your creditors, suppliers, customers, and employees. You should consult with a bankruptcy lawyer before taking this step.
Key Considerations Before Signing Your Next Commercial Lease
If you have successfully terminated your commercial lease, or if you are looking for a new space to rent, you should be careful and diligent before signing your next commercial lease agreement. You should avoid making the same mistakes that led you to want to get out of your previous lease, and you should look for a lease that suits your business needs and goals. Here are some key considerations to keep in mind before signing your next commercial lease:
- Do your research: Before you start looking for a new space, you should do some research on the market conditions, the location, the landlord, and the property. You should compare different options and negotiate for the best deal. You should also check the reputation and reviews of the landlord and the property, and inspect the premises for any defects or issues.
- Read the fine print: Before you sign the lease agreement, you should read it carefully and understand every term and condition. You should look for any clauses that may affect your rights and obligations, such as rent, security deposit, maintenance, repairs, utilities, insurance, taxes, sublease, assignment, termination, renewal, etc. You should also look for any hidden fees or charges that may increase your rent or expenses.
- Seek professional advice: Before you sign the lease agreement, you should seek professional advice from a Commercial lease lawyer, an accountant, or a commercial real estate broker. They can help you review the lease agreement, negotiate better terms, identify any red flags or risks, and protect your interests.
Getting out of a commercial lease early can be a daunting and expensive task, but it is not impossible. There are some ways to terminate your lease early without breaking the bank or getting into legal trouble, such as surrendering the lease, using an early termination clause, assigning the lease, subletting the premises, or invoking a force majeure clause. However, you should always communicate with your landlord, review your options, seek professional advice, and document everything before terminating your lease.
If you are looking for a new space to rent, you should be careful and diligent before signing your next commercial lease agreement. You should do your research, read the fine print, and seek professional advice before signing the lease. You should also look for a lease that suits your business needs and goals, and that gives you some flexibility and security in case of unforeseen events.
Can you get out of a commercial lease?
Yes, it is possible to get out of a commercial lease, although the ease of doing so largely depends on the circumstances. It’s essential to consult with a lawyer to understand your options based on the specifics of your situation.
What are some ways to get out of a commercial lease?
There are several potential ways to exit a commercial lease:
- Look for a bailout clause or a co-tenancy clause in your lease.
- Negotiate an early termination with your landlord, especially if you’re in a desirable location that could be easily re-rented.
- If there’s a substantive breach of the lease by the landlord, this might offer grounds for you to terminate the lease.
- Assign or sublease the space to another party.
- Offer a lump-sum payment to the leasing company to end the lease early.
- If all else fails, you may choose to leave the space and face the potential legal and financial consequences.
- In some cases, filing bankruptcy may terminate your obligations under the lease, although this should be a last resort and requires legal consultation.
What happens if a commercial tenant leaves their lease unannounced?
If a commercial tenant leaves their lease unannounced, they will likely be in breach of their lease and obligated to pay additional fees. The landlord is required to attempt to re-rent the premises as quickly as possible to mitigate damages. The tenant may owe the cost of cleanup and lost rent for the period it takes to re-let the property.
What are the implications of dissolving a corporation to exit a commercial lease?
If a corporation is dissolved to exit a lease, the lease may still be enforceable, and the landlord could potentially sue to recover unpaid rent and other charges. If assets were distributed without paying liabilities like the lease, it might be possible to recover these in court. However, this varies based on the specifics of the lease and jurisdiction, and it’s advisable to consult with a lawyer.
Are all commercial leases the same when it comes to early termination?
No, all commercial leases are not the same when it comes to early termination. The specifics of what happens in case of early termination will depend on the terms set out in the lease agreement. Therefore, it’s important to carefully read and understand your lease before signing it.