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You may have come to the point where you do not want to leave your commercial lease. Perhaps your business is growing, and you need larger premises, or the needs of your business are changing so your hub of operation needs to change. Regardless of your reason, terminating your lease early can be a daunting process if you are not aware of your obligations as a commercial tenant. It is a good idea to maintain good relations with your landlord so that you have the widest pool of options available for leaving your lease early. This article will outline a few of those options and how they would play out.

Check Your Lease Agreement

First, you should check the terms of the lease agreement that you signed. This is usually set out in a deed to lease or, in some cases, in an agreement to lease. When you and your landlord negotiated that document, you may have included an early termination clause in your contract. If you did, that clause would outline the process that you can begin to terminate the lease term early. There may be certain conditions you need to meet before you can end the lease. Once you meet these conditions you can leave your commercial lease. So, it is crucial to read through your lease document carefully to see if there is already such a provision.

There may also be obligations you have as a tenant that you need to fulfil before you can leave, such as a make-good clause. You need to make sure you meet those requirements as well.

Negotiating With Your Landlord

If your lease agreement does not already have provisions detailing how you can leave your lease early, then it is a good idea to talk to your landlord about possible options. If your landlord agrees to let you exit the lease, then you would surrender the lease back to your landlord and revoke your exclusive interest in the property. This releases you from paying rent in the future, but you still have to make up any already outstanding rent. You draw this up in deed of surrender of lease.

Your landlord is not obligated to accept your surrender request, as they may have their own concerns about finding a new tenant. Therefore, as part of the deal, you may have to make an exit payment to make up for the remaining time on your lease or help with finding a new tenant.

Assigning Your Lease

If you cannot negotiate a surrender of the lease with your landlord, another option available to you is assigning your lease to a new third party. They have the same obligations as you did, such as paying rent and maintaining the property, and this creates a new legal relationship with your landlord. 

You still need your landlord’s consent to assign your lease to a new tenant, but under most lease agreements they cannot unreasonably withhold their consent. However, they may have some conditions for assigning the lease, such as:

  • you need to provide evidence that the new tenant is fiscally responsible and has good business skills, such as a CV or reference;
  • the new tenant cannot change the permitted use of the premises;
  • the new tenant has to provide a personal guarantee; or
  • you cannot breach your lease obligations.

If the new tenant defaults on the rent payments, then you are responsible for that debt unless you negotiate something different with your landlord.

Subletting Your Lease

Another option available to you is subletting to a secondary tenant. You may want to sublet the whole premises or just part of it. This may be a useful option if you want to reduce office space and cut down on costs. It is important to check your lease and with your landlord to see if this is a potential option first. Usually, you need your landlord’s consent to do so. 

As with assigning your lease, you have to find a fiscally responsible tenant. You also need to consider whether their business is compatible with yours. You still have to meet your obligations under your lease, so it is a good idea to write up your own agreement with a subtenant. This way, you can make sure they do not prevent you from meeting these obligations.

Licensing Your Lease

Similar to subletting, you can licence your premises to a third party. Licences are generally for a shorter period of time and do not provide exclusive possession of the space. So you would licence out your premises if you intend to share it with someone else, to cut down on costs. This also usually requires your landlord’s consent, and you still have to fulfil your original obligations under your lease agreement.

Key Takeaways

If you want to leave your commercial lease early, there are a number of options available to you. You can usually find these options in your lease agreement. You generally need your landlord’s consent to carry out any of these options, so the process is a lot easier if you have a good relationship with your landlord. If you would like more information or help with ending your commercial lease, contact LegalVision’s property lawyers on 0800 005 570 or fill out the form on this page.

What is a commercial lease?

A commercial lease is when you rent out property from someone else for commercial purposes. This may include a storefront, an office space, or for storage for your business.

Can you back out of a commercial lease early?

You can, but generally, you need your landlord’s consent to. This may present itself as an early termination clause, or you can negotiate a surrender of the lease with your landlord. There would usually be some kind of exit payment involved.

How can I get out of my commercial lease?

There are a number of potential ways you can get out of your lease. If your lease has an early termination clause, or you negotiate a surrender with your landlord, then you have no continuing obligations. Otherwise, you can assign, sublet, or license out your lease as well.

What do I need to do when I leave my commercial lease?

You need to make sure you fulfil your obligations to restore the premises to the state they were in before you moved in if your lease agreement specifies. Depending on how you leave, you may also need to make an exit payment or help find a new tenant. Your lease agreement should list any other obligations you have when you exit your lease.

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