Ending a commercial lease early: a brief guide to the law
Commercial leases usually run for a fixed period of time. But what about ending a commercial lease early? How does a tenant or a landlord end a commercial lease earlier than the agreed end date specified in the lease?
Tenants ending a commercial lease early
A tenant who wishes to end a commercial lease early should in the first instance check whether there is a break clause. Break clauses can be included in a commercial lease to give the tenant greater flexibility. The wording and terms of a break clause are negotiated between the parties before the lease is entered into and will set out the formal circumstances in which the tenant can terminate the lease earlier than the agreed end date.
If the tenant wishes to rely on the break clause they will need to serve notice on the landlord. It is vitally important that the notice is legally compliant and satisfies any conditions specified in the lease. The courts will apply the law strictly and have warned tenants to, “… pay close attention to all the requirements of the clause, including the formal requirements, and follow them precisely.”
To avoid the costly risk of failing to activate a break clause it is recommended that specialist legal advice is taken.
If there is no break clause then a tenant can seek the landlord’s agreement to ending the lease, but there is no obligation on a landlord to agree to such a request.
Tenants can also consider passing the lease on to a new tenant, or, if the lease allows, subletting the property to someone else. Again, professional legal advice should be taken in these circumstances.
Landlords ending a commercial lease early
A landlord wishing to end a commercial lease early can also consider whether the lease contains a break clause. However, landlord break clauses are far less common.
Otherwise, landlords can only end a commercial lease early if their tenant fails to pay the rent or commits a serious breach of the terms of the lease; assuming that the lease contains a ‘forfeiture clause’.
Again written notices are required to bring a lease to an end or a notice period needs to be given to a tenant.
How we can help
We are experienced in helping both landlords and tenants, so if you need guidance on ending a commercial lease early then call our free legal helpline on 0333 888 0404 or emailing us at [email protected]