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Terminating a commercial lease: Can you end a tenancy agreement early?
- AuthorElizabeth Sugden (nee Simpson)
As a commercial tenant, what are your options for ending your lease early?
There may be circumstances in which you wish to terminate your lease prior to the end of the period for which it was granted. This can be for several reasons, including if you have found a new property to rent, or if you can no longer afford the rent payable under your lease.
Can you get out of a lease early?
Contrary to popular belief, as a commercial tenant, you cannot hand back a property whenever you decide that you no longer want to occupy it. Likewise, your landlord cannot terminate your lease as and when they choose to.
Both the landlord and tenant of a commercial property are tied into the commercial lease agreement signed at the start of the lease period.
How to bring a commercial lease to the end in the UK
The first thing to do when considering ending your lease early is to review the terms of the commercial lease itself.
It may be that the contractual term of the lease is due to expire shortly, and you can simply wait for the lease to end before vacating the property and handing the keys back to your landlord.
The commercial lease documents will confirm the end date for the lease and your obligations at the end of the lease.
Break Clauses in Commercial Leases
If the commercial lease is not near the end, there may be a break clause included that would enable you to end the lease before it expires.
Break clauses in commercial leases allow you to serve a notice on your landlord to end the lease early on a specific date.
The lease may provide for either you only, as tenant, to bring the lease to an end, or it might be a mutual right where both you and/or your landlord to have the option to end the lease. There are two main types of break clauses in commercial leases:
1. Fixed date break - this brings the lease to an end on a particular day; and
2. Rolling break - this allows a break notice to be served at any time on or after a particular day.
If you wish to end your lease using a break clause, you must ensure that you comply with the provisions of the lease both at the time the notice is given and that you continue to comply with your obligations under the lease until the break takes effect and the lease actually comes to an end.
If you are not compliant, then your notice may be considered to have no effect and the lease will not end. This will leave you liable under the lease, including for any outstanding and ongoing rent obligations.
It is also important to note that, once a break notice has been given, it cannot be withdrawn. This is the case even if both you and your landlord agree to waive the break notice.
Surrendering a Commercial Lease
Alternatively, if there is no break clause included in your lease, it may be that you can negotiate a surrender with your landlord to give up possession of the property during the term of your lease.
You may have to pay your landlord to surrender your lease and you can only surrender your lease if your landlord agrees.
You will have to enter into a document with your landlord which sets out the terms of the surrender. This will include the date of the surrender, details on any payments which you may need to make to the landlord to be released from the lease, and how rent and service charges will be apportioned up to and including the date on which the lease comes to an end.
Right to assign / assignment of the lease
Another way to end your lease early is to allow someone else to take over the lease. This is called the right to assign or assignment of the lease.
If you have the right to assign your commercial lease to a third party, it will be laid out in your lease agreement. The landlord would need to approve the new tenants and their plans for the property.
This is similar to assignment of the lease, but you retain the lease and simply rent out part or all of the property to a third party.
Again, the landlord would need to approve subletting as a concept and the new tenant who you are subletting to. As the lease holder, you will still be responsible for all rent payments.
Before looking to bring your commercial lease to an end early, you should always seek legal advice to ensure that you are meeting all your responsibilities.
If you have any queries about how we can help you, please contact our expert Commercial Property team who will be happy to discuss the next steps with you.