Jan 07, 2015

Tips For Getting Out Early of an Office Lease

By Don Catalano



Just because an office lease is a binding document doesn't mean that you're stuck staying in a space that doesn't work for your business. While it's unwise to unilaterally break your lease and stop paying, most leases and landlords leave you opportunities to find creative solutions to real estate problems.

If your company is considering an early office lease termination, the most important thing to do is to get expert help. A team with an expert corporate real estate broker and a real estate attorney can advise you as to what is achievable in the market, give you negotiating strategies and help protect your rights.

Once you've assembled your team, it's time to work with them to talk with your landlord and take his or her temperature. The landlord could have just gotten an offer from another tenant to expand and he might need your space to make it happen. If you don't have long left on your lease, she might want to get you out now so that she can find a long-term replacement tenant. The only way to find out what your landlord will allow is to ask. Once you've asked, if they won't let you terminate early, you still have options:

Buy Outs

Frequently, a landlord will let you cancel your office lease by making a lump sum payment. Some leases specify your buy out amount while others leave it up to negotiation. A landlord-friendly baseline is for you to pay the net present value of your remaining lease payments today. However, since the landlord will have the opportunity to lease out the vacated space, you may be able to negotiate a lower payment.

Lease Assignments

Many leases contain language that allow you to assign them to another party. If you can do this, you will have to find someone else to take over the space and the lease. As long as they are willing to pay the face amount of the office lease, you can essentially step away from the space.

The one exception is that many leases will require you to stay available as a guarantor. This means that if the new tenant doesn't pay, you might have to. Sometimes, you can even negotiate this requirement away if you find a replacement that is as financially strong as your company or is even stronger.


If you can't assign your lease, you might be able to find a subtenant. In a sublease situation, you rent your space out another party. You sign an office lease with them and they pay you rent. Then, you take the money they gave you and use it to make the payments on your office lease. While a sublease is usually less convenient than an assignment, it can still reduce your overall costs. Frequently, subtenants end up paying less than the original rent amount. Nevertheless, it's better to get half of your rent paid than none of it.

Moving and Paying

Finally, if you can't work anything out or find a replacement tenant or subtenant, you could always just move out of your space and keep making your office lease payments. This strategy is less unfavorable than it might seem. While you're still stuck paying rent and, potentially, CAMs, you eliminate all of the other costs of occupying the space. You won't need data connectivity, coffee service, janitorial service or support staff to keep the office running. Cutting those expenses today helps to reduce the overall loss and prepare you for when you can either get out of the lease or when it naturally expires.


Other great Office Lease articles:

Commercial Office Leasing 101

Six Amenities to Look for in Office Space

7 Things to Look Out for in Your Office Lease


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Don Catalano

Don Catalano