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One of the most popular contracts used in New Zealand is a commercial lease agreement. This is a legally binding contract as long as it satisfies all the elements of an enforceable contract. This means that either party to the contract can sue the other party in court if they breach the contract. The courts can either give damages or can enforce the contract. Commercial lease agreements are usually set for a certain period of time. Sometimes tenants may want to leave these agreements. This article will explain how you can break a commercial lease agreement. 

What Is a Commercial Lease Agreement?

A commercial lease agreement is a type of contract that governs the relationship between a tenant and a landlord. A commercial lease is used for business rather than residential purposes. The agreement allows certain arrangements to be made between the tenant and the landlord so that the lease runs smoothly. In New Zealand, most commercial leases are similar and are governed by the Auckland District Law Society template. 

What Does It Mean to Break a Lease?


Breaking a lease means ending your commercial lease before the specified date. There are several reasons why someone might want to break a lease. This could be due to the lease becoming too expensive or because the tenant has found other premises to lease. There are several ways that a lease can be broken and these will be detailed below.

Termination Clause

A termination clause will allow you to break your lease. This is because the termination clause can be activated when it meets the set of circumstances contained within it. Once a contract is terminated, both parties are free from any obligations that they earlier had under the contract.

There might be an early termination fee that you may have to pay to activate the termination clause. This is compensation for your landlord who is losing rent and has to find a new tenant.

It is important that you satisfy all the conditions of the termination before you cancel the agreement. Failure to do this might result in you being in breach of contract through repudiation.

Repudiation is where one party walks away from an agreement. If this happens you could be liable in court for damages.

Assignment

Another way that you can break your commercial lease is by assigning the contract. Assigning the contract is where another party takes over your rights under the contract. In this case, your rights are considered those things that benefit you. You do not need the permission of your landlord to assign your contract unless it is specifically stated. However, it is always good to discuss assigning your contract with your landlord as they may want to approve the tenant to whom you are assigning the contract. 

Surrender the Lease

Surrendering the lease is where you walk away from the lease completely. This means that you have discussed with your landlord, and you have both agreed to cancel the contract. If your landlord agrees to do this, you must make sure that you both signed a deed of surrender that confirms what you have agreed. If you do not do this, you could still be found to be in breach of contract.

Furthermore, your landlord is not required to agree to your surrender. This means they can still enforce the obligations that were agreed upon when the lease was formed. 

Subletting your Lease

Another way you can end your lease is to sublet your premises until the lease has come to the end of its term. This option does not relieve you of your responsibilities, and you must gain your landlord’s permission before you sublet the premises.

If you are subletting your property, you are still liable for any damage or late rental payments caused by your subletter. Subletting is not the best option, but it can be a short term fix if you want to get out of the lease without having to break it. 

Key Takeaways

A commercial lease agreement is a legal document that underpins a commercial lease between a tenant and a landlord. It is important as both parties can legally enforce it if there is a dispute. For it to be legally enforceable, it must meet all the elements of a binding agreement. Once this has occurred, either party can claim compensation through the court if the other party fails to uphold their obligations under the agreement. Sometimes, businesses may want to break their lease as they have found another opportunity or it is getting too expensive. In this case, they can either:

  • terminate the lease;
  • assign the lease;
  • surrender the lease or;
  • sublet the lease.

If you need legal assistance to break a commercial lease agreement, contact LegalVision’s contract lawyers on 0800 005 570 or fill out the form on this page.

Frequently Asked Questions

Can I always assign a lease?

As long as there is nothing in your contract that states otherwise, you can assign your lease.

Does terminating my lease free me from any responsibilities?

Yes, you are not obligated to do anything under the agreement once it has been terminated. However, you can still be sued for a breach if this occurred before the termination. 

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