If your property requirements change while you are leasing commercial premises, you can face a difficult situation. You need to understand what your options are so that you can identify the most cost-effective way of getting out of the lease.
Legal advice is essential to help you identify the best course of action, negotiate the right deal and complete the legal requirements.
Your lease may include a break clause, giving you the right to terminate the lease at specified dates. If one of these break dates is approaching, this can be the most effective way of getting out of a lease, leaving you with no further liability for the premises. You need to check the lease carefully and ensure that you follow the required procedures, or you may find that you lose your right to break the lease.
You may in any case be able to negotiate to surrender the lease to the landlord. The landlord may well expect a payment for allowing this. Your negotiating position will be stronger if it will be easy for the landlord to find a new tenant paying a rent at least as high as the one you are committed to.
You may also be entitled to end the lease if the landlord has failed to comply with its terms: for example, by not fulfilling maintenance obligations. In practice, it may be easier to use this as a bargaining tool in negotiations to surrender the lease, rather than going through the required legal procedures.
Depending on the terms of the lease, you may have the right to assign the lease – broadly, selling the lease on to another tenant. If the lease does allow this, you may need the landlord’s consent to the new tenant and there may be restrictions: for example, the landlord may be able to reject a tenant who is not as creditworthy as you.
Unlike termination, assignment does not necessarily allow you to get out of a lease completely. For example, you may well be required to guarantee the next tenant’s payments.
A local chartered surveyor or business transfer agent can help you find a new tenant.
A lease may also allow you to sublet part or all of the premises. Again, there are likely to be restrictions and you may need the landlord’s consent. For example, you might only be allowed to sublet the premises in their entirety.
Subletting does not get you out of the original lease, which remains in force: you have the same liability to pay rent, do repairs and so on. But your subtenant will be paying you rent, and under the terms of the sublease may be responsible to you for carrying out repairs and handling maintenance.
Talking to your landlord at an early point can be helpful. Your landlord my have other tenants waiting in the wings who are ready and willing to pay more rent. In this case, they may be more than willing to negotiate a termination of your lease. Alternatively, if you simply need more space, they may be able to release more space to you.
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