Legal Property Experts

in association with Penman Sedgwick LLP

Agata Marosz – Solicitor - Commercial Property

Terminating A Commercial Lease Before The End Of The Term

Businesses may need to reconsider their commercial premises for various reasons, such as downsizing, expansion, relocation, or the space no longer meeting their needs.

Ending a commercial lease early can be complex, as leases are designed to provide landlords with secure rental income for a defined period. Whether you can terminate or exit the lease early depends largely on its terms, but otherwise reaching an agreement with the landlord is sometimes possible.

Break Clause in the Lease

Some commercial leases contain a ‘break clause,’ which is a contractual provision allowing either the landlord or the tenant, or both, to end the lease early after a specified period. If your lease includes such a clause, it’s crucial to follow its terms precisely. Common conditions will require the notice to be served in a specific manner and timeframe, settlement of any outstanding payments, and ensuring the property is vacant at the break date. Failure to meet these conditions can invalidate the break notice. Seeking legal advice is highly recommended when exercising a break clause.

Surrendering the Lease

Your landlord may be open to negotiating an early termination of your lease by way of surrender. However, they might well require financial compensation in exchange for agreeing to end the lease (and with it the rental income) earlier than originally agreed.

If a surrender is not an option, you might have to explore other legal routes for exiting the lease early such as:

• Assigning the Lease

If there’s no break clause and your landlord will not agree to a surrender, you might be able to assign the lease to a third party. This means transferring the lease to another tenant, who would then take on your obligations. You will usually be responsible for finding a suitable party, and your landlord must approve the new tenant before the lease can be assigned (and might impose conditions on granting such approval). You will have to cover the landlord’s costs.

• Subletting the Premises

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Another option could be subletting the premises to a third party. This allows you to maintain your lease while generating rental income. Subletting requires the landlord’s consent (again at your cost), and the original lease terms will likely continue to hold you responsible for any breaches made by the subtenant.

It is always advisable to seek legal advice when considering terminating a commercial lease early, as professional guidance can help you understand your rights, obligations, and the best course of action for your specific situation.

If you need legal advice, we can help.