As a Tenant how do you end your obligations under a lease?
Sometimes in life, things do not go to plan and you might find yourself no longer needing your business premises and might want to end your lease early. This could be because you are closing up shop or the opposite and are now looking to expand the business to bigger premises.
Understandably, you might need to check your lease to see what options you have. Once you enter into a lease agreement with a landlord whether it be for commercial or residential purposes, you have an obligation under a binding agreement with the landlord to rent those premises until the expiry of the lease.
Normally, neither party will be able to end a lease term early unless both parties have the specific right to do so in the lease. If you find yourself in this situation it is important to speak to a property law specialist to check the provisions of the lease and what options may be available to you.
What are the usual options available?
There are four main options which may be available to a tenant, these include:-
- Termination;
- Surrender;
- Assignment; and
- Sub-lease.
Termination
It is important to know what you are looking for in a lease in order to understand whether you have the right to end your lease early. The right to end your lease early is known as a break clause. A break clause will allow you to end your lease on or after the specified break date or a specific notice period (e.g. 6 months).
It will usually be required that you serve written notice to the landlord that you want to exercise your right to end the lease early.
Each lease containing a break clause may have conditions required to be met in order for the break clause to be effective.
If you do not serve the notice in accordance with the conditions of your lease then the break clause will be ineffective.
Surrender
There is the possibility, however, to come to an agreement to end the lease with your Landlord. This is known as a surrender of the lease. Please note that the Landlord does not have to consider such a request and this option only works if the Landlord agrees.
Assignment
Another option is to potentially assign the lease. This option is not available to everyone and will be based on the terms specified within the lease.
An assignment is a process whereby you transfer the lease to another tenant (business or individual) who then takes on the obligations within the lease.
In all cases it is likely regardless of the terms of your lease, you will need your landlord’s permission to assign the lease; this allows the landlord to have full scope to assess the incoming tenant (if already found) but also to assess any risk this poses to them.
One of the usual conditions or terms to allow an assignment of the lease is to make the outgoing tenant guarantee the compliance with the lease of the new incoming tenant. For example, if the incoming tenant does not pay their rent you could potentially be liable for that rent after assignment.
Usually a landlord will provide their permission but on this condition meaning that you are not fully off the hook and still might be liable.
Sub-lease.
The final option is to sublet the premises. Again, this depends on the terms specified within the lease. Usually, the lease will require you to obtain their permission in order to sublet. Sometimes, you are allowed to sublet part or whole of the premises which can be helpful if you don’t require all the space anymore or if you would like to get rid of the premises altogether.
However, please be mindful that sub-letting the whole of the property will still not free you from your obligations under the lease, you will still be liable to pay any sums due under the lease to the landlord, but the you will receive rent from the subtenant. If the subtenant does not pay their rent you will have to pay the rent of your lease out of your own pocket. Even though you might feel removed from the premises completely, your obligations under your lease will still continue.
How can we help
We can help to ensure that you fully understand what options are available to you under your lease. We don’t want you to suffer in silence and feel you are trapped in a lease. It is our job to assess the circumstances and your lease to advise you on the best possible route of action.
In summary, talk to a member of our team today to get clear, impartial advice.
Contact us
To find out more, please contact Emma Smith on 01264 721 701 or Emmas@talbotwalker.co.uk.
This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.