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Suppose you rent commercial premises in England and Wales, but they no longer suit your business. In that case, you may consider how you can get out of your commercial lease before the end of the lease term and the potential costs if you did. This article will help you understand the different options you have when ending your commercial lease early.
Do You Have a Break Clause?
The first thing you should do if you want to get out of your commercial lease early is to read your lease document carefully. You may have something referred to as a ‘break clause’. A break clause allows you or your landlord to end your lease before the end of the fixed term of your lease. There will always be conditions that you have to meet to do this. For example, it may be at a particular point in your tenancy or after a certain time. In addition, there are often specific ways to communicate notice to your landlord.
Negotiate With Your Landlord
Your landlord may be willing to negotiate with you to end your lease early through a deed of surrender. A deed of surrender is a legal contract that ends the original lease. For example, it may include a provision that requires you to pay a sum of money to your landlord in return for agreeing to let you end the lease early.
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Find Someone Else to Take Over Your Lease
Another option is to see if your landlord will agree to let you find someone to take over your lease. Provided your landlord agrees to this, you can find a suitable commercial tenant (which the landlord must also agree to) who will take over your original lease for the remaining time left in the fixed term. To do this, you, the new tenant and your landlord enter into a deed of assignment.
A deed of assignment transfers the lease to the new tenant and contains the landlord’s consent to the new tenant and the lease transfer. If you opt for this solution, you and the new tenant must agree on who will pay the landlord’s legal fees. The landlord is effectively doing you a favour, and so you should not expect them to pay their own legal costs.
Sublet Your Lease
Your landlord may agree to you finding a subtenant for the lease. Alternatively, your lease may contain a clause that expressly allows you to sublet the whole or part of the business premises. If this is a possibility, this works similarly to finding a new tenant, and your landlord must agree to the subtenant. The vital difference between a sublet and finding a new tenant to take over the lease is that you will still be responsible for all terms and conditions of your lease. For instance, you are still responsible for ensuring that:
- the rent is paid on time; and
- any provisions relating to the state and maintenance of the property are met.
Costs Involved With Ending Your Commercial Lease Early
There will be costs involved with all of your options to end your lease early. Therefore, you should weigh these up carefully against the costs of staying in the property until the end of the fixed term of your lease.
If you do have a break clause, your lease will explain the costs of ending the lease early. Alternatively, if you do not have a break clause, then you may need to pay your landlord’s legal fees and possibly a financial sum in exchange for ending the lease early. If your landlord agrees to let you find a new tenant for the lease or allows you to take a sub-tenant, there will also potentially be costs in advertising to find a new tenant or sub-tenant.
Moreover, if you seek to leave your commercial lease early because your business is having financial difficulties, it is essential to be honest with your landlord. In this situation, they will want to weigh up the likelihood of you paying rent in the future and potential eviction costs against the costs of finding a new tenant. Thus, they may be more willing to let you end the lease early.
Key Takeaways
If you want to leave your commercial lease early, you do have some options, namely:
- taking advantage of a break clause in your lease;
- negotiating with your landlord to allow you to leave early;
- finding a new tenant to take over your lease; or
- subletting your lease to a subtenant.
It is essential to understand what your lease does and does not allow. It is also sensible to be honest and upfront with your landlord so you can come up with a solution that works for you both.
If you need help understanding your options for leaving your commercial lease early, our experienced commercial property and leasing lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0808 196 8584 or visit our membership page.
Frequently Asked Questions
A break clause, also known as an early termination clause, is a clause in your commercial lease that provides you and your landlord with a way to end your lease early. There are usually cost implications, or you can only do this at a particular time in your lease contract.
Potentially, yes, this is an option. If your landlord agrees, you can assign your lease to a new tenant, which will release your responsibility concerning the lease. Alternatively, your landlord may agree to let you sublet your lease to someone else; in this situation, you would still be legally responsible for all the original terms of the lease, so this is something to consider carefully.
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