01782 715725

mon-fri: 9am - 5:30pm

37 Marsh Parade

Newcastle-under-Lyme, ST5 1BT

News

How to Get Out of a Commercial Lease

7th January 2021

A number of businesses and self-employed professionals are feeling the impact of the Covid-19 pandemic. Many companies and professionals have seen business demand decrease or even come to a standstill altogether. Knowing your options when it comes to your commercial lease is therefore particularly important during these uncertain and difficult times.

Whether you’ve been impacted by Covid-19 or not, you may want to get out of your commercial lease early for a plethora of reasons. Exiting a lease due to a commercial premises’ unsuitability as your business grows or downsizes, or negotiating a new lease with better terms are for instance just two of the reasons why you may need to move on.

As a leading commercial estate agency, we assist commercial landlords and tenants at all stages. With years of experience as dedicated property consultants, our commercial estate agency has helped countless clients throughout Staffordshire, Cheshire and Shropshire with their commercial property requirements.

Here the property specialists at our commercial estate agency share their expert advice on how to exit a commercial lease early.

Have you been a reliable tenant?

If you have been a star tenant, then it may be worth speaking directly to your landlord or the commercial estate agency that is acting on their behalf. A sympathetic landlord or agent may review your current lease to allow you to stay in the property or provide additional options where you can work together to move on appropriately.

Is there a break clause in your lease?

Many leases that we have dealt with as a commercial estate agency contain break clauses to deliver a level of flexibility to both the landlord and the tenant. These break clauses tend to come into effect after a set period of time. 

Be sure to check your commercial lease for a break clause, noting the terms and conditions that apply to leaving your commercial lease earlier than planned. You may have to give written notice of two to three months. Other terms attached to break clauses include providing written notice to a specific address.

If you fail to meet the specific requirements of your break clause, your lease exit may become invalid, which will prevent you from exiting your commercial lease early.

Is there room for negotiation?

As a commercial estate agency, one of our primary roles is to ensure the landlord-tenant relationship is a successful one from start to finish. We liaise with tenants on behalf of landlords to ensure all parties are satisfied. But the service delivered by our commercial estate agency doesn’t come to an end once the tenant decides they want to get out of their commercial lease early.

Some landlords are open to negotiations for an early lease exit, particularly if the lease does not contain a break clause. We facilitate such negotiations and provide professional advice throughout to ensure a ‘clean break’ can be made by both the tenant and the landlord. Solicitors and conveyancers are also likely to be involved in the process.

Can you afford to exit?

With professional assistance from our commercial estate agency, tenants can gain a clear understanding of, if any, the implications of exiting a lease early. In most circumstances, tenants will have to make a proposal to surrender the lease. It is however advisable that you consider the existing market conditions as well as whether the financial outlay that goes hand-in-hand with an early exit outweighs the cost of fulfilling your original lease terms. 

The landlord, or the commercial estate agency representing them, will respond to negotiations and provide a settlement figure. You are however not obliged to accept this figure. This settlement figure does not equate to the final cost of exiting your lease. Due to the need for professional advice for both the tenant and landlord from solicitors, negotiating a deal can be expensive.

If you are looking to exit your commercial lease due to financial difficulties, your landlord or the commercial estate agency may request that you provide evidence of this. In response, your landlord may choose to accept your proposal or even lower your rent to suit your needs better.

Could you assign to a third party?

If you do not have a break clause or your landlord is unwilling to negotiate, our commercial estate agency recommends assigning your lease to a third party.

Assigning a third party as the new tenant will mean you can relinquish some of your responsibilities and your landlord does not miss out on the financial income that comes with a tenanted commercial property. When assigning to a third party you may have to provide a personal guarantee for your new tenant’s future rent payments. You will also need to obtain your landlord’s consent before assigning your commercial lease. In addition to this, you will be in charge of sourcing a new tenant that meets the requirements of your landlord. 

Your landlord is likely to complete their own checks before they accept the new tenant. The new tenant will have to provide further information on their financial status, proposed use and whether they are likely to have an alteration requests during their lease term. They will also have to provide references.

Would you consider sub-letting?

With your landlord’s consent, you could explore the option of sub-letting, particularly if you are considering exiting due to business finances. 

If you decide to sub-let, your lease will become the head lease, meaning you have more responsibilities in the management of the property. As the head tenant, you (not the landlord) will be the sub-tenant’s contact should they have any questions or issues. 

For further commercial property advice or to discover more about our professional services, please contact our commercial estate agency today.