What Happens If You Break a Commercial Lease?
Many people don't consider what happens if you break a commercial lease and how it can create a financially complicated situation for you and your business.4 min read
Updated June 23, 2020:
Many people don't consider what happens if you break a commercial lease and how it can create a financially complicated situation for you and your business. The commercial lease is a legal agreement between a landlord and a business owner who is renting out the property for business practices. As a tenant renting a commercial property, it is your responsibility to know the real estate laws in your state and what your rights are if you decide to break your commercial lease before it ends.
Various Reasons Why a Business Owner Would Break a Commercial Lease
Oftentimes, a business owner who is renting a commercial property must consider breaking a commercial lease before their agreement is up. Though we may find ourselves in these situations, it is important to consider all the options before you decide to sign the lease.
One of the most common reasons for breaking a commercial lease is because your business has been failing financially and you aren't able to keep up with the monthly rent and other financial aspects of your business. However, many business owners find themselves in a situation where they must break their commercial lease because they are doing so well financially that they need to relocate to a larger facility to keep up with their growing business.
How to Cancel Short-Term Monthly Tenancy
One of the first things you need to do before canceling your lease is to give your landlord a signed piece of paper that notifies him that you're canceling your agreement. Most landlords require a 30-day notice before you give you decide to break your lease. However, some commercial properties require you to give a 60 to 90-day notice. Always check with your lease agreement before deciding to cancel.
Ask your landlord to inspect the premises to ensure that no damages have been made before you move out. You shouldn't be charged for small damages that happen over time in your property. Some of these usual wear and tear items of interest are:
- Carpet replacement.
- Repainting the walls.
- Deep cleaning the bathroom.
It may be a good idea to prepare your landlord a list of items that you know will need to be fixed as soon as you plan on vacating the premises. Make sure to have your landlord check off all items of interest during their final walkthrough of your commercial property to ensure that they have seen everything that needs to be repaired.
How to Cancel Long-Term Commercial Leasing
Canceling a long-term lease agreement will require you to pay the remainder of the rent payments for your lease. Commercial landlords have the ability to take legal action against you if you leave without paying what you owe them. You will have to consider what your plan of action will be if you decide to break your commercial lease early. It is in your best interest to have a provision in your lease that helps cover you in the event of an early exit.
This is why it is important to understand all the aspects of commercial leasing before you decide to sign a long-term lease. Let's imagine for a moment that you have to get out of your commercial lease before your term is up and you don't have any options to utilize to help you with your situation.
Be upfront with your landlord and ask him or her to cancel your lease early. Provide written documentation that you need to break your lease sooner than you had anticipated. They may consider putting your commercial property on the market for a higher rent if the market is doing reasonably well. However, the landlord may charge you for the remainder of the rent that is owed to them unless you come to an agreement. You will need to take legal action to protect your business and yourself if the situation gets out of hand with your landlord.
Fortunately, your state's rental laws may be on your side by requiring your landlord to reduce his losses by finding another tenant to rent his commercial property. Always check with your state's laws to stay educated on the matter. You can always help your landlord find another tenant to replace you to maintain a good relationship during this time. However, your landlord could still consider taking legal action against you. If they do, you will need to find the right attorney to help you with your case. Consider all of your options before you decide to cancel your commercial lease.
If you need help with breaking your commercial lease, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.