Q&A: How do I get out of my commercial lease?

There are a number of reasons why a commercial tenant might want to end their lease earlier than expected, and these are the main options that may be available to do so:

1. Let the term end

Check the contractual term of your lease. If it is due to expire soon, the simplest option might be to let the term run out. This is because if the lease is not “protected” under the 1954 Landlord and Tenant Act (the Act), the lease will simply expire on that date regardless of whether or not you vacated. However, if your lease is “protected” by law, and assuming no notices under the law are given in advance, you’ll need to vacate the property and stop trading in it by the contract’s expiration date to ensure it expires.

Our real estate team can advise you about how “protected” you are under the law, what options are available to you, and help you understand other tenancy obligations you may need to comply with before your lease expires.

2. Practicing the condition of rest

Check if your lease contains a tenant break clause, which is often referred to as a “select option.” This allows the tenant to give notice to the landlord to terminate the lease before the lease term expires.

It is important to ensure that the break notice is given correctly in accordance with the lease and that any terms of the break are complied with. Our real estate disputes team can advise on the terms and conditions of the break clause and ensure that the notice of the break is properly served. Please also refer to our website Question and answer about exercising the break condition for further information.

3. Set your interest in the lease

Check if your lease allows you to transfer/sell your share of the remainder of the lease to a third party, referred to as a “assignment”. Owner consent is generally required for a waiver and the owner may require you to provide an Approved Guarantee Agreement (AGA) as a condition of the waiver. AGA is a guarantee by you of the new tenant’s performance of the tenant’s covenants in the lease agreement. This means that even after the lease has been transferred, you will still be “in trouble” if the new tenant fails to comply with the terms of the lease.

If you want to waive the lease, you will be responsible for finding the new tenant and the lease will likely require you to apply to the landlord for approval of the waiver and pay the landlord’s legal costs in connection therewith. Our real estate team can assist with the waiver application, documenting the owner’s approval of the waiver and the waiver itself. Please also refer to our website Question and answer about the appointment of a lease for further information.

4. Agreeing to surrender with the owner

You can contact the landlord to request a lease waiver, which is an agreement between the landlord and tenant to end the lease early. The landlord is not obligated to agree to waive the lease and the terms of surrender are business negotiations between the two parties. However, the landlord may ask for a premium to agree to surrender, particularly if there are a number of years left on the lease or if they anticipate difficulty re-letting the property. The surrender agreement may also seek a full and final settlement between the parties, including the ruins, to help give you a clean break.

Our real estate team can assist with negotiation and surrender documentation and our real estate dispute team can assist with any issues arising from negotiations, particularly regarding threats.

5. Renting all or part of the property

You may also consider reducing the value of all or part of the property. As with the assignment above, check if your lease agreement allows you to rent out all or part of the property to a third party. Landlord consent is generally required for under-lease. However, you will not get rid of your share of the lease and will still be liable to pay the rent, even though you will collect the rent from the tenant, comply with the other terms of the lease or ensure that the tenant does.

6. Provide three months’ notice by law

If the lease is “protected” by law, has no more than three months left, and you are certain you want to leave on the expiry date of the contract, you can file a notice under section 27 (1) of the law which gives the landlord at least three months’ notice You intend to terminate the lease on the expiry date of the contract.

Alternatively, if your lease is “protected” by law, you are currently “holding” by law after the contractual expiration date has passed, and you have not given Section 26 notice for a new lease, you can file a Section 27 (2) notice ) of the law, giving the landlord at least three months’ notice of your intention to terminate the lease on any date.

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