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Solutions for early termination of a commercial lease

On Behalf of | Jul 21, 2020 | Firm News |

Businesses need to remain flexible under changing circumstances. When a problem or opportunity arises, commercial tenants may need to either relocate or close its brick-and-mortar doors.

Unfortunately, the timing of these issues is not always advantageous. A commercial tenant may be subject to a lease with a remaining duration of several years. Rather than continuing to pay rent and other costs without gaining any value from the property, commercial tenants may need to find another solution.

Negotiate with the landlord

Your commercial agreement lease likely contains a termination clause, which often obligates the tenant to pay a fee or all unpaid rent for the remaining period upon breaking the lease. Regardless, it may be worthwhile to discuss breaking the lease with the landlord.

If the landlord agrees to terminate the agreement early on mutually acceptable terms, you can formalize a deed of surrender to end the lease with minimal financial impact.

Because vacant commercial properties can be difficult to fill, the landlord might not have an interest in early termination. Developing a strategy with a real estate attorney could be beneficial for this discussion.

Consider subleasing the property

If escaping the obligations of the lease is not an option, subleasing is a possible opportunity. Subleasing allows a new commercial tenant to rent the property through the original tenant. The original lease still applies to the original tenant in this scenario.

Whether a tenant can sublease could depend on both New York laws and the terms of the original lease. An attorney can review both local laws and the agreement terms, and they can also develop a new agreement for the sublease. Because it can be difficult to be in the middle of a landlord and a subtenant, especially if a dispute arises, it is advisable to seek legal counsel from the beginning.

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