What Are Your Options When You Want to Break /Change the Terms of Your Lease?
Your lease doesn’t work for you anymore, how can you change it up? A common question I often get from clients is “ What are my options if my lease terms are no longer working for me, and I am considering breaking a lease, or looking to discuss alternatives with an expert?” I often hear “Should I talk to my landlord about this?”
When you sign a lease for 3, 5 or 10 years, you are on the hook for every one of months! So if you are finding it tough to make rent, or if you have found another option that would be better for your business, don’t get into a legal mess.
Here are important options for you to come out ahead.
Option 1: Escape - An escape clause may be available at the earliest stages of lease negotiations. An escape clause allows the tenant to void their offer to lease when specific conditions met - such as you haven’t arranged enough financing. Use a savvy commercial real estate agent and negotiator when you prepare your offer to lease, and your escape clause can save you before it’s too late.
Option 2: Subleasing and Assignment - You may have the right to sublease or assign your lease to someone else. You need your landlord’s permission, and there may be other conditions or penalties, but if you can find another business that has the resources and likes the location, then you may be able to hand over a portion or all of your lease obligations.
Option 3: Termination - Tenant termination clauses are very rare and very important. Some forward-thinking businesses are negotiating these clauses into their lease with the help of their commercial real estate agent. If a tenant meets certain conditions, their termination clause allows them an out. Penalties often apply.
Option 4: Offer to pay a penalty - Making your landlord the right offer might persuade them to let you go. How about three months of continued payment, then three months ‘penalty’? Offer your landlord help to find a new tenant right away, and some landlords would let you go, especially if they are able to raise the rents for a new tenant. Working with the right commercial agent through this can shed light on how to navigate the conversations and communication.
Option 5: Rent “month-to-month” - Avoiding a formal lease may have the advantage of giving you the flexibility to give short notice before vacating a property liability-free. It’s important that you ask a real estate and legal professional if you find yourself in this flexible, if vulnerable, position.
Call me if you need my support as you look to alter your lease obligations. I am happy to help you talk through various scenarios, and guide you through the process.
As always, here’s wishing you storefront success,
Matt
