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What are your options if you need to get out of your commercial lease?

On Behalf of | Nov 20, 2020 | Property Law

When you signed the five-year lease for your space in a commercial office building, a mixed-use development or a shopping center, you never imagined that you would have any need or desire to leave before the term was up. However, things change. 

Maybe you need more space -– or perhaps less. Maybe the area has changed significantly in the past year or two, and you’re just not attracting enough business. Perhaps you found another space that’s too good to pass up. Whatever the reason, you need to get out of your lease. 

How do you do that without a significant financial penalty or ending up in court with your landlord? Let’s look at some options. 

Is there an exit clause?

Read the lease carefully –- or, better yet, have an experienced real estate attorney read it. See what it says about penalties for breaking it. See if there is a termination or exit clause. Has the landlord met their obligations? If they haven’t, that could be grounds of terminating the lease. Some commercial properties -– particularly those with retail business and restaurants –- stipulate that they won’t go above a particular vacancy rate or that an anchor tenant will remain. If one or both of those things happens, it can have a drastic impact on the success of the remaining businesses.

Can you buy out the remainder of your lease?

If you don’t have long left on your lease, it may be worth the money to negotiate a buy-out with your landlord. Before you broach the subject, find out whether other potential tenants are in the market for space in the property. If they are, you might be able to negotiate a good deal -– perhaps just giving up your security deposit.

Are you allowed to sublease the space?

Again, this should be in the lease. Even if the lease forbids subleasing or doesn’t address it, it can’t hurt to ask. Just remember that if you sublease the space, you remain responsible for it and any damage or problems caused by your sublessee. 

These are just a few options. Many landlords are willing to negotiate the terms of a commercial lease -– including a tenant getting out of it — if it will benefit them. Your attorney can help you determine the best option(s) and help you negotiate your way out of your lease so that you can move on.