4 Ways to End Your Commercial Lease Early in the UK

Business can be unpredictable, particularly in today’s climate, where more people work from home. Some businesses are switching to a virtual or online model and find that they do not need physical premises for their business. In contrast, some businesses are growing and need bigger premises than they had foreseen. If you signed a commercial lease for business premises in England or Wales, you might be wondering how you can end your lease early. This article explains the different options for ending a commercial lease in England and Wales.

Break Clause

A break clause is a clause within your lease agreement that provides for the lease to end early. It is usually a set date or an agreed period where you can end the lease before the end of the lease term. For example, you may sign a lease for ten years, but the lease may have a break clause allowing you to end the lease after five years. You may have to abide by specific requirements to take advantage of the break clause, so it is essential to read your lease agreement carefully and take legal advice if necessary.

Agreement to End the Lease

Just as everything is up for negotiation when you agree to a commercial lease, one way to end a commercial lease early is to contact your landlord and see if they will agree to end the lease early. If they agree, you can surrender your lease. Of course, your landlord can say no, or they may agree, but only if you agree to other terms. 

Passing Your Lease on to Someone Else

Even if your landlord does not agree to let you end your lease early, they may agree to let you find a new tenant for the property. This is known as a lease assignment. The landlord would need to agree to the new tenant, and it is relatively common for a landlord to request the original tenant to provide a personal guarantee for the new tenant.

Subletting Your Lease

Another option for ending a lease early is to sublet your lease to another tenant. Subletting works slightly differently from a lease assignment in that you still have your lease agreement with the landlord. However, effectively you have a new lease between you and your sub-tenant. Again, your landlord would need to agree to this if your lease does not provide for subletting. 

Under this arrangement, you would ultimately be responsible for: 

• ensuring that the rent on the property is paid; and
• the management of the premises, i.e., your sub-tenant would contact you with any problems regarding the property, not your landlord.

When Can a Landlord End a Lease Early?

You may be curious whether your commercial landlord can end your lease early. Much like with residential tenancy agreements, a landlord can seek to end the lease early if you: 

• fail to pay rent as agreed; or
• do not abide by any other obligations contained in your lease agreement.  

Costs of Ending Leases Early

The cost of ending a lease early depends on what method of ending the lease you can agree on with your landlord. If there is a break clause in your lease, any costs involved with this option should be evident in the lease document. Further, if your landlord agrees to let you surrender your lease, they may request a significant financial sum to make up for some of the rent they will not get from you. Generally, suppose you are finding a new tenant to assign your lease to or are subletting your lease. In that case, you will have to pay all the costs involved, including: 

• your landlord’s legal costs; and
• any costs associated with marketing the premises to a new tenant.

Key Takeaways

Whilst it is possible to end your lease early, it is something to consider carefully. You must read your lease document closely so you understand the ramifications and costs involved with ending your lease early. Even if you can agree with your landlord to end the lease, it may be that you are still subject to financial obligations if you assign the lease or sublet the property to a new tenant.

If you need help with ending your commercial lease in England and Wales, our experienced 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.

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