Can a Commercial Lease Be Terminated Before the End of the Term?

  • Posted

COVID-19 has had a significant impact on almost every business in the UK. For many businesses, it means they no longer require their business premises, or can no longer afford it. Other reasons for ending a lease may include a downsizing or expansion of operations, the premises are no longer fit for purpose, or relocation. Regardless of the circumstances, if you need to end a commercial lease early, there are several options which may be available to you.

In this article, we look at the factors which may affect whether you can terminate a commercial lease before the end of the term.

Is it difficult to end a commercial lease before the expiry of the term?

Ending a commercial lease early can be challenging – after all, the contract is designed to give the landlord an element of security and assurance. Whether you are able to end the lease early will generally depend on the terms of your lease, but it may be possible to reach an agreement with the landlord.

Surrendering a commercial lease

If you have a good relationship and have been a good tenant, the landlord may be sympathetic to your situation, and you may be able to come to some agreement, although you may be expected to pay a certain amount of financial compensation for surrendering a lease (if the landlord is willing to agree to this). However, there may be other formal legal options available to you.

A break clause in the lease

Many leases include what is known as a ‘break clause’ or an ‘option to terminate’. This clause offers either or both the landlord and the tenant the opportunity to bring the lease to an end after a pre-defined amount of time.

If there is a break clause in your lease, you will need to strictly adhere to its terms and there are many potential pitfalls. For example, notice may need to be given in a specific way at a set time, monies due under the lease may need to be paid and vacant possession of the property may need to be given. Failure to meet such requirements is likely to invalidate your exit from the lease. Legal advice should always be sought.

Assigning a commercial lease

Where there is no break clause in your lease, and your landlord is unwilling to negotiate the surrender of the lease, it may be possible to assign the lease to a third party. You will generally be responsible for finding someone to take on the lease, and the landlord must approve the third party before the lease can be assigned.

Here to Help

If you need advice or assistance then please contact Helen Bunting, Associate Solicitor specialising in Commercial Property on 01992 300333.

Please note the contents of this blog are given for information only and must not be relied upon. Legal advice should always be sought in relation to specific circumstances.