In order to keep up with changing demands of a business you may no longer be in need of your business premises.
However, if you lease premises, you have a binding agreement with your landlord and neither of you will generally be able to end the lease early unless the lease terms grant you the specific right to do so.
If you cannot wait for your lease term to expire, it is important to check your lease carefully to see if you have any ability to end the agreement early.
If your lease contains a break clause, you can look to terminate your lease on or after a specified break date by serving a written notice on your landlord making it clear you are exercising that right.
In order to serve an effective break notice, you need to be certain you follow the provisions of the lease. If you don’t, the lease will not end and you will still be bound by its terms, even if you vacate the property.
It’s a good idea to check whether there is a specific date that you can end the lease on or whether it is an ongoing right. You will then need to check the lease to confirm the notice period you are required to give. For example, your lease might state that you are required to give at least 6 months’ notice before the break date.
Your lease will also specify the method and address of service for the break notice. If it is unclear, or your landlords address has changed then it’s always best to be on the safe side and it might mean sending a break notice to several addresses.
When you are exercising a break clause it may not be enough to simply vacate the premises on or before the break date. Break provisions often contain pre-conditions and it’s always advisable to take advice to ensure you’ve complied with all of these.
You might be entitled to assign your lease. An assignment takes place when you transfer your lease to another person or business and they then become the tenant and take on the obligations under the lease.
You will usually need your landlord’s permission to assign your lease and they will want to check that the proposed new tenant is going to be able to pay the rent or other amounts due under the lease.
Most modern leases also require that you, as outgoing tenant, guarantee the performance of the tenants covenants by the incoming tenant – and so, if the new tenant doesn’t pay the rent or service charge for example, then you might be held liable.
Your lease may allow you to sublet the premises, usually with your landlord’s prior written consent. Subletting will give you the opportunity to lease the premises and have your own lease in place where you will be the landlord of the sub-tenant.
You will still be liable to pay any sums due under your lease with your own landlord, but the subletting will give you a rental income if the rental value of the property has increased since you took your lease.
If your lease allows you to sublet, it will likely contain several terms that needs to be included in the sublease and it’s vital that you obtain professional advice or you might be in breach of your own lease.
You and your landlord may come to an agreement to end the lease, regardless of the lease terms. However, your landlord is under no obligation to consider a request to surrender the lease.
If your landlord does agree to a lease surrender, it is best to get this agreement in writing as there are several points that will need to be negotiated such as the actual end date of the lease, whether you are paying a fee to end the lease early and who is paying for any repairs. You will also need to understand whether the surrender will then release you from all and any lease liabilities as this isn’t always the case.
If you decide to wait for your lease term to expire naturally, we still advise you to check your lease as not all commercial leases will automatically come to an end on the contractual expiry date. Failure to correctly carry out any of the procedures correctly could mean that you breach the terms of your lease or that lease liabilities continue so it is always best to seek advice and be sure.
Contact one of our Real Estate specialists to discuss the terms of your lease.