Occasionally the need arises for a company to break a commercial lease. Whether going out of business, expanding or downsizing, the process remains the same. Breaking a commercial lease is often expensive and full of legal wrangling, but it is possible to do.
- Skill level:
Other People Are Reading
Examine your lease for early termination clauses. Most commercial leases give specific terms as to the circumstances you can exit the lease without penalty. If your reasoning doesn't qualify under the acceptable exit terms, you can expect to face the financial penalties expressed in the contract when you break the lease.
Speak to your landlord informally about the lease agreement. Test the waters in a friendly conversation to find out how receptive he is to simply terminating the lease. It never hurts to ask-he may already have someone interested in your location.
Offer a buyout to exit the lease. Even if your landlord is unwilling to terminate voluntarily, he may be more cooperative if he has a financial incentive.
Take your lease agreement to a lawyer if your landlord refuses to negotiate an end to the lease. Although you can break a commercial lease without a lawyer, legal representation ensures both you and your landlord stay within your legal boundaries during the process.
Fulfill your obligations--you signed a legal document and must abide by its terms. During an early lease termination, your landlord must actively seek a new tenant. Depending on your lease terms, you may be liable to continue paying rent until a new tenant appears; even though you are no longer in residence. In addition, if the landlord finds a lower paying tenant, your business can be liable for the difference in rent until the original lease expiration.
Tips and warnings
- Check your lease for subletting rights. If you have them, you can find a new tenant to take your place.
- Before signing a commercial lease, always read it carefully and consider the exit terms. In case your situation changes, it's helpful to have an easy out.