A commercial lease is one of the most extensively used, yet possible the least understood document signed by business owners.
Our commercial property solicitors take a hands-on approach in providing expertise in all areas of commercial property law. Frances Watts and the team at The Head Partnership take pride in supporting local businesses in Berkshire, Oxfordshire and Buckinghamshire. with all aspects of commercial leases, building controls, and rent reviews. This article is one that will affect commercial tenants, as well as landlords …. how to end a commercial lease early.
Understanding your options when exiting a lease prematurely, is key to ensuring you don’t get yourself and your business into a difficult situation. The Head Partnership work with businesses to find best solutions, and most cost-effective approaches to end a lease early.
Four common reasons for wanting to end a lease prematurely
- Premises are now unsuitable for use:
- More employees, so requiring more space
- Less employees e.g. too much space
- Relocation of business
- Premises are too expensive:
Be careful, this can be a tricky situation. If you think you can get out of a lease early because the rent review has increased, think again. There is no automatic right to get out of your lease at this point.
- A challenge to the new proposal (e.g. in in line with open market place)
- Negotiate with the landlord, but ensure you understand your position (see below)
- A business has offered the landlord a higher rent for the premises:
If this is the case, your options are:
- Possibility for termination
- Assign your lease
- Sublet (at a profit…)
- A requirement to improve your lease on your current premises:
If this is because of a health & safety requirement, for example, one option is:
- Possible surrender of current lease
(Discussions with chartered surveyor or solicitor before entering into negotiations)
Three possible ways to exit a lease prematurely
Understanding your lease is vital when you want to get out of a lease early, as it all depends on your terms within the lease. Other factors that come into exit discussions include the commercial property market conditions, together with understanding your own negotiating position. Please contact Frances Watts to find out what your position is.
As solicitors, we would want to help strengthen your position by assessing the lease and commercial property market surrounding your situation. Here are the three ways to exit a lease:
- Terminating the Lease. Your lease may have a break clause (see below) or you may be able to negotiate with your landlord. This typically ends any ongoing liability you have to the landlord. This option is best if you have less than 2 years left on your lease.
- Lease Assignment . This is where you would sell the lease to another business. It is a more complicated action than termination, depending on the terms of the lease, and may leave you with some liabilities under the lease still. This option is best if you have more than 2 years left on your lease.
- This option isn’t strictly getting out of a lease, but it’s a back-up if you are struggling with cash-flow. Speak to one of our legal team before you decide this option as leases can vary with their restrictions on sub-letting. This option means you retain all your liabilities and the current lease remains in force but helping you require a monetary use of extra premise space you may have.
In conclusion, there are always ways to terminate a lease on a business premise.