What You Need to Know About Breaking a Commercial Lease

Business is tough, and there’s always a chance you’ll go out of business or will have a need to change locations before your commercial lease is up. Yet you should always consult a Long Island real estate lawyer before you do, as there can be some significant legal and financial consequences for taking this action.

Residential leases and commercial leases are entirely different animals. Residential lease law assumes the average renter is not very sophisticated. Residents are surrounded by a series of important protections which means that breaking a residential lease may not cost much more than a few month’s rent and the loss of a security deposit.

By contrast, a commercial lessor is expected to be a sophisticated businessperson. The commercial lease is treated as a contract that is just like any other business contract. That means breaching the contract could expose you to a lawsuit.

It also means the consequences for breaking your lease will be dictated by the nature of the lease itself. 

You and your real estate attorney should carefully review the terms of your lease. This will also help you and your attorney determine whether there are grounds for breaking the lease.

Keep in mind courts typically will not allow you to forfeit a lease for “trivial or technical reasons.” 

Your remedies will also be determined by the wording of the lease. For example, there may be an opportunity for you to sublease the commercial property. This leaves you responsible for the lease and the damages, but may prevent you from having to pay exorbitant damages. 

You may also have a buy-out option, allowing you to make a lump-sum payment to get out of your lease without liability. 

A “co-tenancy” clause is another nice item to look for. You may have leased your space with the understanding that a big-name tenant was going to be in the building. If that tenant leaves you may have grounds for breaking the lease.

Whatever you do, avoid simply leaving the building before consulting with your attorney.

Negotiation helps.

In some cases it may benefit the landlord to have you leave. For example, breaking the lease may allow your landlord to reissue the property at a much higher rental rate. If that’s the case the landlord may be happy to work with your company. It’s not unheard of for landlords to simply agree to end the lease, but you will need a Deed of Surrender to protect yourself legally.

An attorney can also be extremely helpful in this regard, negotiating the best deal while making you look more professional and trustworthy. 

Get help as early as possible if you think you are going to have to break your lease. This will help you familiarize yourself with your options and will ensure that breaking your lease is as pain-free as possible.

See also:

5 Protections a Landlord Wants in Any Long Island Lease

5 Things to Know About Warehouse Leases

Top 5 Things a Tenant Wants to Know About a Long Island Office Lease