No matter what business you're in, there are reasons you may need to get out of a commercial lease agreement. Your business may be doing so well you need a bigger space, or you may have fallen on hard times that don't allow you to afford the space you have anymore. In either case, breaking your commercial lease agreement may be difficult, but it is possible.
Look through your lease agreement for any bailout clauses. Even if you didn't think to negotiate specific terms when you first signed the agreement, there may be language in your lease that allows you to opt out of the contract if your sales are below a specific level or if another important tenant leaves the building, affecting your business.
Ask your landlord. You may be surprised to find him sympathetic to your concerns, especially if your lease is in a desirable area that is easy to lease to a new tenant. He may allow you to leave or be open to negotiating terms that work for both of you.
Sublet the space to another tenant. If your landlord takes the hard stance of holding you to your contract, try to find another tenant to move in and take over your lease. If rent has gone up recently, it may be easy to convince a new tenant to take over your lease at a lower price than they might find elsewhere. Unfortunately, if you find the space hard to rent, you may need to charge less than you owe each month and supplement the rest of the cost with your own money through the end of the lease agreement. Still, this may be preferable to paying the amount in full.
Find your landlord in breach of contract. If your landlord breaks the contract first, then you can get out of it. This might include building repairs that have not been made or security issues that are not being addressed. Be careful to use this option only if you have a legitimate argument against your landlord. If you abandon your lease agreement, the landlord can sue you, and you will have to be able to prove your case in court.
Offer a lump sum payment that is greater than your monthly rent but less than the total you owe on the lease agreement. This may be an attractive offer to your landlord if she's tight on cash or if she thinks she can rent the space out again within a few months. You may need to negotiate the exact amount, so start with a fairly low figure and bargain.
Try to think ahead when signing a commercial lease agreement. Set terms in the contract that allow you to leave if revenue drops below a certain number or if other tenants leave the building or development. Make sure the lease agreement is favourable to you, the tenant, before you sign it.
Tips and warnings
- Try to think ahead when signing a commercial lease agreement. Set terms in the contract that allow you to leave if revenue drops below a certain number or if other tenants leave the building or development. Make sure the lease agreement is favourable to you, the tenant, before you sign it.