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Looking to bring your Commercial Lease to an end? Solutions for Tenants

Sometimes things do not go according to plan and continuing your occupation of a commercial property may no longer be viable. The prospect of attempting to terminate your lease can appear daunting. Dunn& Baker Solicitors can help; advising you on the options available to you and assisting with the legal work to ensure that you are successfully relieved of your obligations under your lease.

If you are a tenant considering terminating your lease, the first step is to check the terms of your lease. Many leases contain early termination clauses, known as “break clauses”. A break clause will allow you to terminate your lease early, or on a set date, provided you give the correct period of notice and comply with the conditions of the break. If you wish to exercise a break clause, you should pay particular attention to the required notice period, calculating the exact amount of notice the Landlord requires. If the notice to terminate is late, it will be invalid. Equally, you should ensure that all sums due under your lease are paid up to date and that you have complied with all the terms and conditions of the break clause; failure to do so may again, render the termination invalid.

You may find that your lease does not contain any option for early termination. However, you are still free to approach your landlord to discuss whether you are able to surrender the lease. Your landlord may agree to a surrender of your lease, although often, you may be required to pay some form of financial penalty. If your landlord agrees to a surrender, the surrender does not have to be formally documented. The lease can be surrendered by conduct; for example, a tenant handing keys back to a landlord, and the landlord accepting them. This is known as surrender by “operation of law”, and you will be released from future obligations under the lease, as will your landlord, but not necessarily past obligations. Alternatively, you may agree with the Landlord to enter into a formal Deed of Surrender. This will give you comfort that the surrender has effectively taken place and you may also negotiate terms that enable you to be released from liability for past breaches under the lease as well as future liability.

Whether you are able to exercise a break or negotiate a surrender of your lease, one of the biggest problems when ending a lease is dealing with repairs. This will be a particularly important issue if you have full repairing liability under your lease. A landlord will typically want to inspect the Property on termination and if there are wants of repair, you could find yourself facing a substantial bill. Always try to ensure that you return the Property in a properly maintained state and carry out any repairs that are required under your lease.

If the Landlord does not agree to accept a surrender, you may be able to find someone who wants to occupy your property and take over the lease. Commercial letting agents can assist with this. Commercial leases usually allow you to transfer or assign your lease, or perhaps grant a sublease to a third party. Landlord’s consent is usually required and often conditions are imposed, so you should check the particular terms of your lease.

If you are looking to terminate your lease and would like to discuss your options, please contact:

Stephen Harris, Partner – Commercial Property (Head of Department)

Neil Starr, Partner – Commercial Property

Julia Spies, Associate – Commercial Property and Corporate Commercial

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