Article written by Aimal Gram, Solicitor, Commercial Property department
The COVID-19 pandemic has had a significant impact on almost every business in the UK. For many businesses, it means they no longer require their business premises or can no longer afford it. There are many other reasons, not directly related to COVID-19, that you may wish to exit a commercial lease. Perhaps your operations have downsized or expanded, and the place is no longer fit for purpose, or you need to change location. Regardless of the circumstances, if you need to get out of a commercial lease early, there are several options which may be available to you.
In this article, we look at the factors which may affect whether you can get out of your commercial lease before the end of the lease term.
Is it difficult to get out of a commercial lease early?
Getting out of a commercial lease early can be challenging – after all, the contract is designed to give the landlord an element of security and assurance. Whether you are able to end the lease early will generally depend on the terms of your lease, but you may be able to come to an agreement with your landlord.
Surrendering a commercial lease
In some cases, landlords may be sympathetic to your situation, subject to the specifics of their own circumstances of course, and you may be able to reach agreement for an early surrender of the lease. You may be expected to pay a certain amount of financial compensation for surrendering a lease.
A break clause in the lease
Many leases include what is known as a ‘break clause’. This clause offers the party in whose favour it is drawn the opportunity to bring the lease to an end after a predefined amount of time. Your solicitor can check your lease for a break clause and explain to you how this might operate in your favour.
If there is a break clause in your lease, you will need to adhere to its terms which may stipulate a period of notice and how you should notify your landlord. For example, you may need to provide your landlord with several months’ notice in writing, or you may need to notify your landlord at a specific address. These requirements must be met as failure to do so could invalidate your exit from the lease.
Assigning a commercial lease
Where there is no break clause in your lease, and your landlord is unwilling to negotiate the surrender of the lease, it may be possible to assign the lease to a third party. You will generally be responsible for finding someone to take on the lease, and the landlord must approve the third party before the lease can be assigned. There are often ongoing obligations on the outgoing tenant after an assignment of the lease, and you should consult your solicitor for advice on the extent of those obligations.
To discuss this article further or for specific advice on a commercial property matter, please email me or contact me on 020 8305 3524.