Can I get out of a commercial lease early?

17-11-2020


COVID-19 has had a profound impact on almost every business in the UK. For many businesses, it means they no longer require their business premises, or can no longer afford it. There are many other reasons, not directly related to COVID-19, that you may wish to exit a commercial lease. Your operations might have downsized or expanded, and the place is no longer fit for purpose, or you need to change location. Regardless of the circumstances, if you need to get out of a commercial lease early then there are options which may be available to you.

Surrendering a commercial lease

If you have a good relationship and have been a decent tenant, your landlord may be sympathetic to your situation, and you can come to some agreement. You may be expected to pay a certain amount of financial compensation for surrendering a lease, including covering the legal fees of the landlord’s solicitor. If they are unwilling to come to any agreement then there may be other formal legal options available to you.

A break clause in the lease

Many leases include what is known as a ‘break clause’. This clause offers both landlord and tenant the opportunity to bring the lease to an end after a predefined amount of time. We can check your lease for a break clause and explain to you how this might operate in your favour.

If there is a break clause in your lease, you will need to adhere to its terms which may stipulate a period of notice and how you should notify your landlord. For example, you may need to provide your landlord with several months’ notice in writing, or you may need to notify your landlord at a specific address. These requirements must be met as failure to do so could invalidate your exit from the lease.

Assigning or subletting a commercial lease

Where there is no break clause in your lease, and your landlord is unwilling to negotiate the surrender of the lease, it may be possible to assign the lease or sublet to a third party. You will generally be required to meet various conditions and the landlord must also approve the third party first. In the case of an assignment you are also likely to be required to stay on as a guarantor. Occasionally, you can assign or sublet only part of the lease, although this is fairly uncommon.

A word of caution

Getting out of a commercial lease early can be challenging – after all, the contract is designed to give the landlord an element of security and assurance. Whether you are able to end the lease early or pass on your obligations will generally depend on the terms of your lease, but you may also be able to come to an agreement with your landlord.

If you are wondering whether you can exit your commercial lease early then please contact a member of the commercial property team. In the past twelve months in particular we have assisted various industrial and retail clients in relation to their leases in Newbury, Thatcham, Reading, Slough and Maidenhead.


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