How To End A Commercial Lease

In the current economic climate, more and more businesses are struggling. One of the ways in which they cut costs is by ending the lease of commercial properties.

Some common reasons for doing so are: business is unexpectedly poor and owners decide to downsize; the premises no longer being suitable for operation or in a state of disrepair; deciding to relocate or even close the business.

Ending a Lease

My lease is not due to end for some time…how can I end it now?

First, check the terms of your lease. If you have the ‘license to assign’, you can sell or assign the rest of your lease to a third party. You will need to request permission to do so from your landlord, but if he agrees, you can usually remove yourself from the lease quickly while keeping everyone happy.

Your landlord will probably wish to do background checks on the company you’ve chosen to take over the lease. It’s important for the landlord to reassure himself that the new tenants will be financially responsible and able to take on the property for the duration of the lease.

Assigning a Lease

When assigning a lease, be warned that:

  • You/your company is responsible for paying the landlord’s costs, including reference checks and any legal fees incurred by assigning the lease
  • Your landlord may ask that you act as guarantor for the new tenants. This is a good way to reassure the landlord that you’re not handing the lease over to a financially irresponsible company as you will be responsible for payment if the company defaults. Therefore, you are not completely free of liability for the lease.
  • Landlords are allowed to deny a license to assign if there are reasonable grounds to do so. For example, if the replacement company was not able to afford to pay a similar amount of rent on their last property, the landlord would have every right to refuse.
  • You need permission from your landlord to assign a lease, and it is best to get the permission in writing. If you assign the lease without the direct permission or knowledge of the landlord, you will be in breach of the contract and your landlord can take you to court.

Assigning a lease is a good way to extricate yourself from a commercial property contract, but it can be a complicated legal process with many pitfalls. It important to speak to us to make sure you’re acting within your rights and that your landlord can’t pursue you for breach of the lease. We’ll look at the contract and tell you if you’re allowed to assign the lease, fight for permission if your landlord refuses to grant it and complete any paperwork for you. Ensuring you’re on the right side of the law is our priority: we want to save you time and money and prevent costly court cases if a mistake is made.

Remember that you always need to take advice specific to your circumstances before acting or deciding not to act. For more information, contact Burt Brill & Cardens on 01273 604 123, email enquire@bbc-law.co.uk or visit one of our offices.

Return to Commercial Property services or read more on Assignment of Leases.