Termination Of Commercial Leases
Ending a commercial lease can get complicated and comes with significant legal implications. Whether you are a tenant or a landlord, you should work with an experienced lawyer in your province to ensure hassle-free termination of your commercial lease.
While your lawyer will explain the entire process and all its implications in detail, let us take you through the key aspects related to ending your commercial lease.
Why Do People Terminate Commercial Leases?
Let us start by understanding the most common reasons behind the termination of a commercial lease:
Business Relocation
If the tenant wants to shift the location of their business, they may end their commercial lease early and prepare a new one at a new location.
Business Termination
A commercial tenant may be experiencing difficulties continuing their venture and want to terminate the same. Under such circumstances, ending their commercial lease is often the best alternative.
Premise-related Issues
The tenant may also want to terminate the commercial lease if they are experiencing issues with the premises. This could be due to unexpected problems or issues the landlord failed to address beforehand.
Breach Of Contract
Any violation of the commercial leasing terms can end the contract before its stipulated date.
Let us now address an important question, “How to terminate a commercial lease?”
How To Terminate A Commercial Lease?
While the precise steps depend on your circumstances and lease, here are the key steps involved in terminating a commercial lease as a tenant:
Reviewing Your Lease
Before anything else, it is important to review your lease agreement. Focus on its termination clause to know the conditions under which you can end the lease and the implications of the same. Review the notice period and see if you will be charged any penalty for ending the lease as a tenant. In most cases, early termination comes with a penalty. You can also confirm if your commercial lease allows subletting to save yourself from the penalty.
Informing The Landlord
Let your landlord know about your decision to end the commercial lease. Be honest while talking to them and share your concerns about the situation. See if you can mutually negotiate the terms of the termination in a way that benefits both of you. Moreover, it is better to notify your landlord with a written notice. This keeps the matter official and gives everyone proof for future reference.
Negotiating The Termination Terms
You can start with the negotiations after informing your landlord about ending your commercial lease. Put your case forward and propose the terms that best suit you without harming the other party. Do your best to reach a mutual termination agreement for a win-win situation. You can also seek your lawyer’s help in negotiating the terms of ending the lease. If possible, see if you can make your landlord agree to an amendment in the lease regarding its termination.
Finding A Replacement (If Applicable)
If the landlord allows you to sublet your commercial property, you should look for an ideal replacement tenant. Ensure that the new tenant meets your landlord’s requirements and receives their approval before making any final decisions.
Taking Legal Actions (If Applicable)
If your landlord is responsible for your ending of the commercial lease (by breaching contract terms or not addressing specific issues), you may need to take legal action. Look for an experienced lawyer to advise you on legal grounds and end the lease in your best interest.
Documenting The Process
It may sound trivial but it is advisable to document the entire process of ending your commercial lease. From notices to agreements, keep a written record of your communication with the landlord at all stages. You should also document the commercial property’s condition before terminating the lease.
What Are The Consequences Of Terminating A Commercial Lease?
The precise consequences of ending your contract will depend on your commercial lease and circumstances. Here are the most common and likely consequences you can expect before making this decision:
Penalties
You are most likely to be charged a penalty for ending your commercial lease early as a tenant. Your landlord may also ask you to continue paying the rent until you find a new tenant (in case of subletting).
Impact On Your Credit Rating
Ending a commercial lease early is likely to hurt your credit rating. If you are already struggling to maintain a healthy rating, think twice before making such a decision.
Litigation
As a landlord, your tenant may take legal action against you if they believe you are responsible for ending the lease. Even as a tenant, your landlord may challenge you in court if they believe you are accusing them on invalid grounds.
Receive Comprehensive Legal Help In Terminating Your Commercial Lease From Cube Law
Whether you are a tenant or a landlord, Cube Law helps you terminate your commercial lease legally. Our experienced lawyers will help you draft documents, review them, and advise you on taking the best route to ending your lease. You can also seek our help in negotiating the termination terms with your landlord. Our legal professionals work in your best interest and guide you throughout the process.
(Please note that this is no legal advice from Cube Law. The content here is written only for informational purposes. To learn more about our services and terminating your commercial lease, contact us today.)