Apr 12, 2021

Tips When Trying to Get Out of a Commercial Lease

By Don Catalano


Tips When Trying to Get Out of a Commercial Lease
Regardless of the size of the business, there will be a time when getting out of a commercial lease is the best option for the business. Unlike residential leases, you can’t simply walk out of a commercial lease. Some clauses are needed to be fulfilled. To get out of a commercial lease pain-free requires a deliberate process. In this article, we are going to explore the steps you need to follow to get out of a commercial lease legally.


Use the Early Termination or Exit Clause

Early termination clauses are often referred to as break clauses. They allow commercial tenants to end a contract before the original due date. It is important to bear in mind that break clauses should have been negotiated ahead of time when forming the contract. In case this is not so, you can work with a tenant rep to help discover what you can do with the binding agreement.


You must do research or contact a legal professional to learn more about your state’s commercial real estate laws. This will help you in finding cases where your landlord could be held accountable for breaking terms in the lease.


Sublease Your Space

If the reason you are considering getting out of your commercial lease is because of the need to downsize or cut costs, you may want to consider subleasing. This allows you to keep your space and still leave it. In order words, it allows you to delegate the responsibilities in the binding contract. Before subleasing a space, it is important to check if such a provision is in your existing contract. In most cases, landlords include clauses that allow you to subcontract.


When subleasing your office space to new tenants, it is also important to note that you are still responsible for any damage that happens during the sublease. Hence, exercise caution when subleasing your space.


License Your Premises

As remote works continue to grow due to the effect of the pandemic, you may want to consider licensing your office space. If you have your landlord’s permission, consider licensing different parts of your office to generate revenue that can be used in offsetting their business expenses. You could license several areas of your office: printing areas, meeting rooms, office space to create coworking spaces or kitchens.


Lease Buy-out

A lease buy-out will relinquish the contract and allow you to move on without taking responsibility for any damage done by a third party through licensing, unlike using the subleasing option. The landlord can be open to buy-out the remainder of your lease, whether it’s a one-time payment or your security deposit if there are many people in the market looking for new space.



Finally, and perhaps, the most important, negotiate. If all else fails, it is always good to have a common ground with the landlord, explain your situation, and ask if they’re willing to renegotiate the originally agreed-upon terms. It is important to prepare for negative responses such as additional legal fees or early termination fees if that’s what the landlord wants. When taking this option, you may want to work with a lawyer or tenant rep broker to negotiate for you to make sure no unnoticed terms creep into the new contract.


Here are a few other articles we know you'll enjoy:

The Costs of the Benefits of the Internet of Things (IoT)

5 Technology Tools to Help With Commercial Site Selection

How Technology is Revolutionizing Commercial Real Estate


Subscribe to our blog for more CRE tips!!
Subscribe Now


Office Space Calculator Use Now
10 Steps to Cutting  Your CRE Expenses Download
Improve EBITDA by Cutting Your RE Costs Download


Don Catalano

Don Catalano