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A Complete Guide to Terminating Your Lease

03/24/2014 9:39 AM | Deleted user

Got an unreasonable landlord? Maybe you have a better problem – you’ve outgrown your current office space much faster than you anticipated.

Regardless of why you’re in this situation, the fact of the matter is you need to terminate your lease earlier than you thought.

So what can you do?  A few ideas:

  1. Negotiate ahead of time.  The best way to solve this problem is really to have a plan in place when you first discuss your lease with your landlord.  Most will settle for lease terms of around two years.  So, negotiate a short time-frame, and if your business experiences unexpected changes, you’re able to exit at a more convenient time.
  2. Walk away from the lease.  You can always walk away from your lease at any time, but remember you’re still on the hook for the rent.  Law, however, does note that your landlord has an “affirmative obligation” to try to find a replacement tenant.  Will your landlord actually try to do that when you’re still responsible for the rent, though?  Not too likely.  And if the new tenant doesn’t pay as much rent, you have to make up the difference.

    It’s not the healthiest thing for your business, but if you absolutely need to get out, it’s one way to do so.

  3. Offer a buy-out or let your landlord keep part of your security deposit.  You can try to do this, but if you have a long time left on your lease, you may not be able to swing it.  However, if your landlord thinks he can lease the office space without too much difficulty, he may allow this to happen.  It’s worth a try if you’re desperate to get out.
  4. You can leave in the event of a “substantive breach.”  What, the carpets weren’t cleaned for a year?  You can’t leave in this circumstance, but if your landlord breaches a significant provision in the lease, such as not repairing a caved in roof, that can be grounds for leaving.  However, be very clear on the reason you are leaving – “substantive breach” is debatable.  And if the reason is debatable, your landlord can sue you.  It’s a wise idea to consult with a commercial real estate attorney first in this case.
  5. Assign or sublease the space.  Hopefully you have negotiated this right in your contract.  Sub-leasing means you’re legally liable for all payments, while someone else occupies the space.  Assigning transfers all legal obligations of your lease to another party, so that’s preferable if possible.  Remember, however, that most leases give landlords the right to approve or disapprove of the new tenant.

Whatever your situation happens to be, just remember to be honest above all else.  You may be trapped in a lease you don’t want, but you did agree to it.  If you are reasonable, your landlord is more likely to respond to you positively.


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