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Can we get out of a commercial lease early?

On Behalf of | May 14, 2021 | Business Contracts

A typical commercial lease agreement binds parties to the contract for about three to five years, unlike residential leases, which are more commonly yearly or month-to-month. A multi-year agreement can benefit both parties in different ways, but it can also present complications if a business wants to get out of the lease.

There are several reasons why this could happen, though most likely, these situations arise when a tenant is unhappy or can no longer utilize or afford the space. But is it possible to get out of a lease early?

Check the lease terms

The first place to look when assessing your options is your signed lease. Often, it will provide information on if and how parties can terminate the agreement early.

You may have an early termination clause in there that allows you to break the agreement without financial penalty. Typically, these will require certain conditions to be in place, such as a lease violation by the landlord or terminating after a specific period.

Otherwise, the lease may specify the financial penalties tenants must pay if they wish to terminate the contract.

Negotiate with the landlord

If your lease does not have this information, or if you are working under extenuating or unusual circumstances, you can contact your landlord directly.

In some cases, both the landlord and the tenant agree that early termination is appropriate and can negotiate an exit plan. You might also discuss alternatives like subletting or transferring the lease.

Examine your legal options

Many companies can get out of a commercial lease early in the ways discussed above. However, that is not always the case; thus, the dispute can require legal action.

Tenants may seek lease termination by contesting the validity of the lease itself or suing a landlord in court. These efforts can be the most aggressive, but they can be effective ways to cancel a contract with fewer penalties. And in some cases, the courts may also award financial damages.

There can be a lot at stake when parties are attempting to terminate a commercial lease early. Understanding the process and your options can help you protect your business, minimize costly missteps and pursue your desired outcome.