Securing the perfect commercial premises is essential for any successful business. As circumstances change, the premises that once suited your company’s needs can sometimes become a burden, as the market improves and rents rise. Whether there are months or years left in your tenancy there are a number of options available which can help you move from your premises before your lease is due to end.
As with any formal contract, although there are barriers in the way, tenants may be able to ‘get out of’ their leases early. How tenants choose to do this will be dependant on the clauses within their lease agreement. Typically there are 4 methods to leave a lease early:
1. Employing a break clause
Where the lease includes a break clause you may be able to terminate your contract after a specified amount of time – this will relieve you of any continuing liabilities to the landlord. Businesses should be cautious and ensure they comply with the conditions surrounding a break clause. Failing to keep the property in suitable repair may put you in breach of the conditions in the break clause, costing you your right to terminate early.
Although it is advisable to include a break clause in a commercial lease sometimes this is not always possible. You may be able to negotiate an early exit, although doing so without the support of a break clause may weigh heavily on your finances. Your landlord is under no obligation to let you go, so as a condition for accepting a surrender of your lease do not be surprised if they insist on early termination fees, professional fees, and repair fees.
3. Assigning the lease to a replacement tenant
Whilst this may be the most favourable option in terms of realising any value your lease may carry, there may be restrictions on who you can assign the lease to. Sometimes for short leases – under two to three years – tenants may be prohibited from assignment.
Where you have less then two years remaining in your lease negotiation may be a more appropriate solution. Typically assignment negotiations are time consuming and expensive. As well as carrying various legal liabilities regarding the future payments owed on the property and any professional fees, it will also be your responsibility to secure a replacement. Choose wisely however otherwise you may end up with the lease coming back to you again.
Subletting may partially relieve the financial burden of your tenancy, therefore allowing you to move commercial premises. This is not the same as terminating your lease and you will still be bound by the same legal liabilities as when you occupied the property. You will also have to contend with the additional burden of overseeing your sub-tenant.
Whether you choose to sublet or to negotiate an early exit, seeking advice from a solicitor is crucial in ascertaining your position regarding any liabilities you may have. Here at Farleys our commercial property team specialise in legal matters arising from leases and contracts. For further advice call 0845 050 1958, alternatively please complete an online enquiry form.