Can a Commercial Lease Be Terminated Before the Lease Term Is Over without Liability?
A tenant cannot terminate a commercial lease before the lease term is over without facing liability unless there is a provision in the lease which allows for early termination. Commercial leases are usually leases for duration of years, such as 5 years, called a fixed term lease. A tenant who agrees to a fixed term lease must meet all of the obligations under the lease until the lease ends, even if the business fails or the premises is vacated.When Can a Commercial Lease Be Terminated Before the Lease Term Is Over without Liability
A commercial lease can be terminated before the lease term is over without liability only if there is a provision in the lease that allows for the early termination of the lease. The most common avenues for early termination of the lease without liability are: - Break clause: A break clause gives a tenant or a landlord an option to terminate a lease at least once during the term of the lease. The break may be used by the landlord or the tenant only when the conditions of the break clause have been met. The right to break may only occur as indicated in the lease, either on a certain fixed date(s) or at any time during the lease. There is no universal type of break clause and issues related to the drafting, timing, beneficiaries, penalties, and frequency of use all vary depending on the terms of the break clause agreed upon in the lease.
- Assignment: An assignment is a transfer of all interest in a leased property to another party before the original lease expires. An assignment is only possible if allowed by the lease.
- Breach of lease agreement: A lease may be terminated by either party when the other party significantly violates the terms of the lease agreement.
- Agreement: The landlord and the tenant can always agree to modify the length of the term at any time during the lease.
Remedies for Early Termination of a Lease If a commercial lease is terminated before the end of the lease term, the non breaching party may seek damages for the breach. Such damages are often very difficult to measure and the parties to the lease often stipulate to liquidated damages which are a flat sum of money. The lease may also contain an acceleration clause where all other obligations under the entire term of the lease become due upon the other parties breach. Many leases also provide that in a dispute the winning party will be awarded attorney's fees.
Do I Need a Real Estate Attorney to Terminate My Commercial Lease Early? Commercial real estate law is complex, varies by jurisdiction, and varies depending on the terms of the lease. A real estate attorney can make certain that your interests are represented when you negotiate a commercial lease. A real estate attorney can also provide assistance and legal guidance concerning the right to terminate a commercial lease before the lease term expires. |
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