How to Terminate a Business Lease

Written by j. johnson
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How to Terminate a Business Lease
Not all business ventures work out as planned. (old western store image by Sherri Camp from

There are many reasons why you may need to terminate a business lease. Your business may no longer be profitable, or you may need to close the business because of family issues. On the upside, you may be ready to relocate your business to a larger location, but you can't afford to keep paying both your old lease and the lease you'll need to sign for the new location. If you're undergoing financial hardship or have an urgent personal matter to attend to, you'll also need to terminate the business lease.

Skill level:


  1. 1

    Decide whether you're absolutely sure you want to stay in your current location. If not, don't accept your lease's terms for renewal. Many business leases include term options, meaning you must pay for a certain number of years, after which you have the option to renew. Understand your term options and, if possible, don't renew your lease.

  2. 2

    Talk with your landlord about the possibility of terminating the lease if you have no other options. Explain to him why you want to terminate the lease and why it's important for your personal, financial or professional well being.

  3. 3

    Walk away from the lease. You can either let your landlord try to find a new tenant, which he has a legal obligation to do, or you can find your own tenant to take over the business lease. Understand that if you allow the landlord to find a new tenant, he may be unmotivated or he may find a tenant who's only willing to pay part of the lease. In this case, you must make up the difference.

  4. 4

    Ask your landlord about a buy-out. You may be able to pay a one-time fee or allow the landlord to keep your security deposit to get out of the lease. This option is easiest if you have one year or less on the lease; however, even if you have more time left, the landlord may agree to a reasonable buy-out if she feels she can easily rent out the space.

Tips and warnings

  • Include a clause allowing an early exit of a new lease before you sign it. Such a clause might state that the lease can be terminated without consequence if your business hasn't become profitable within a certain time frame.
  • Before signing a new lease, include a clause that allows you to find your own replacement tenant as long as he is financially able to make the payments. This will protect you from the landlord refusing the new tenant to keep you on the lease.

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