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Terminating a commercial lease due to financial strain

On Behalf of | Mar 25, 2024 | Business Law

Leases are the foundation for many businesses, providing a stable space to operate and grow. But what happens if your business hits a rough patch and keeping up with the rent becomes a burden?

The good news is that there might be ways to legally terminate a commercial lease agreement when cash flow is tight. Exploring available options can help you know which ones to consider if the need arises.

Negotiating with your landlord

The first option is a lease surrender, which involves agreeing with your landlord to mutually terminate the lease early. Be prepared to offer concessions, such as covering some remaining rent or helping find a new tenant.

You can also explore subletting if your lease allows it. Subletting the space to another tenant can free you from the financial burden while the subtenant pays rent directly to the landlord. This option requires careful screening of potential subtenants to help ensure they comply with the lease terms.

Exploring the terms of the lease agreement

Do you know if your lease agreement has an early termination clause? Many commercial leases include a “break clause” that allows either party to terminate the lease under specific conditions, often with a predetermined notice period and potential fees. Carefully examine your lease for such a clause and its associated stipulations.

In some cases, you can use your landlord’s breaches to escape your commercial lease legally. For instance, landlord negligence in providing essential repairs or maintaining the property as outlined in the lease agreement might be grounds for early termination.

Regardless of the chosen path, it’s prudent to keep your landlord informed throughout the process. Transparency and clear communication can foster a more positive outcome for both parties.

Facing financial difficulties doesn’t have to mean being trapped in a commercial lease. By exploring the options above and seeking legal guidance, you can potentially find a legal solution that minimizes financial strain and allows your business to evolve accordingly.