How do you end a commercial lease?

There are a few ways you could end a commercial lease including waiting for the lease term to expire, exercising a break clause or surrendering the lease.

Ending a commercial lease for tenants

A break clause acts as a lifeline, offering the landlord, tenant, or both parties the option to end the lease prematurely without incurring penalties. The clause outlines specific conditions, including the notice period and potential requirements like meeting financial obligations by an agreed date. This provision gives both parties flexibility in the lease, allowing for adaptation to changing circumstances. For example, the landlord may need to regain possession of the property or the tenant may need a bigger office space.

Tenants seeking an early exit without activating a break clause have some options available to them. The first thing to do would be to have an honest and transparent conversation with the landlord. This may result in an amicable agreement to terminate the lease prematurely.

Another avenue for tenants is the assignment of the lease or subletting, subject to the landlord's consent. In an assignment, the lease is passed on to a new tenant, possibly with the requirement of a guarantee for the new leaseholder. On the other hand, subletting involves letting part or all of the premises to another business.

Fixed-term tenancies provide a structured end date, allowing for a straightforward conclusion to the lease. Tenants desiring continued occupancy after the fixed term must secure the landlord's approval and adhere to the terms of the existing lease.

 

Ending a commercial lease for landlords

For landlords, ending a lease early without a break clause typically hinges on tenant non-compliance, such as failure to pay rent or meet other lease obligations. A 'forfeiture clause,' if included in the lease, gives landlords the ability to end the lease in these types of situations, although this doesn’t stop the tenant from raising legal challenges.

 

Notice periods

After a fixed-term tenancy expires, tenants are generally required to provide a three-month notice for lease termination, and landlords typically need to give six months' notice. These notice periods are specified in the lease agreement and are crucial for a smooth transition.

For leases protected by the Landlord and Tenant Act 1954, tenants possess the right to extend, except under specific circumstances outlined in the lease. Consulting a solicitor is advisable for tenants who are unsure of their lease's status under this Act. 

Terminating a commercial lease involves intricate legal considerations. Seeking professional advice from commercial property solicitors ensures adherence to legal requirements and a seamless conclusion to the lease agreement, benefitting both landlords and tenants.

Talking to a commercial property lawyer is crucial. It helps both parties know when they can legally end a commercial lease, preventing disputes and unnecessary costs.

 

How Can GloverPriest Help?

At GloverPriest, we can provide the expertise, guidance, and negotiation skills necessary to ensure that your lease agreement is comprehensive, fair, and beneficial for your business.

From negotiating favourable lease terms to identifying potential risks and loopholes, GlovePriest is here for you. 

If you would like further advice on your commercial property, please don’t hesitate to speak to one of our expert commercial lease solicitors today. Complete our enquiry form.

 

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