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In business, things don’t always go as planned. Adapting to new challenges and making tough choices are all a regular part of a business owner’s job. At times, this can mean getting out of contracts that are no longer working for you, such as a commercial lease agreement.
Breaking out of a commercial lease agreement isn’t impossible however, it’s not simple either. The last thing you want to be in trouble for is unlawfully breaching a commercial lease agreement!
There’s a number of legal factors to consider when getting out of a commercial lease agreement – keep reading to know more.
Common Reasons Leases Get Terminated
It’s not unusual for a lease to get terminated. Often, unexpected circumstances might prompt a necessary change. A few reasons you might be considering ending your commercial lease agreement early include:
- Financial hardship
- Relocation of your business
- Unforeseen industry changes
- Downsizing and restructuring
- Business closure
Whatever your reasons are, it’s important to navigate this situation with careful consideration.
Reviewing Your Lease Agreement
The first step to breaking a commercial lease agreement is to thoroughly review the agreement itself. The terms of the contract will provide the pathway to break the lease early, so it’s essential that you’re well informed on the terms of the lease.
There’s a number of important factors you will need to look out for when reading your commercial lease agreement, we’ve listed a few of them for you below.
Key Clauses Regarding Early Termination
Your commercial lease agreement might have already addressed the possibility of early termination. When looking at your agreement, keep an eye out for specific clauses that determine what the process is for ending the lease ahead of time.
A few clauses to look out for include:
Notice period: A notice period specifies the minimum amount of notice you must give your landlord before leaving, such as providing six weeks’ notice. It ensures that both parties have adequate time to make necessary arrangements.
Termination fees: A termination fee may be owed to the landlord for ending the lease early. These fees will vary in amount and may be designed to compensate the landlord for potential losses stemming from the early termination.
Default provisions: Default provisions detail what happens when a party does not comply with the terms of the lease. They outline the consequences and remedies for breaches, including financial penalties, loss of deposits or legal action.
Understanding Your Rights In Agreement
When reviewing your commercial lease agreement, it’s important to understand your rights as a lessee. A commercial lease agreement shouldn’t contain anything that breaks the law or places you in an unfair position.
It can be difficult to read and assess a commercial lease agreement – they aren’t exactly light reading material. It’s a good idea to seek the help of a legal expert when going through your commercial lease agreement. A legal expert can walk you through the contract and provide you with much needed clarity, giving you a better idea on what to do next.
Exploring Subletting Or Assignment Options
If you need to break out of your commercial lease agreement, then simply walking away from the lease isn’t your only option. You could consider subletting the premise or assigning it to another tennant.
Of course, your landlord would need to agree to this. Even If subletting or assignment options aren’t in your commercial lease agreement, you can always talk to your landlord and explore these options with them.
That brings us to the next next step in breaking your commercial lease agreement – negotiating with your landlord.
Negotiating With Your Landlord
Once you have understood what your options are and how you want to proceed with breaking your lease agreement, it’s time to talk to your landlord. The idea of negotiating with your landlord might seem daunting however, it’s important not to be intimidated.
Rather, make sure you are clear, open and honest right from the beginning. It’s much easier to reach a conclusion both parties are happy with when there’s transparency and integrity right from the start.
Here are a couple of things to think about when discussing the end of your commercial lease agreement with your landlord.
Initiating A Conversation Early
Try to approach your landlord as early on as possible. No matter what the notice period (or lack of notice period) may be on your lease agreement, proactively approaching your landlord without any delay to let them know of your plans is a good idea.
Most landlords will also appreciate being given time to prepare. Don’t just call your landlord up and launch into lease termination negotiations — instead let them know what’s happening and arrange a good time for the both of you to discuss matters in detail.
Presenting A Clear and Compelling Case
When the day comes to talk to your landlord, it’s vital to make sure you’re well prepared. Have the relevant documentation ready, be ready to communicate your case, present your desired outcome and most importantly, ensure you’re listening to your landlord’s side of things too.
This is also a good time to look at alternative solutions with your landlord, such as subletting or lease assignment.
Evaluate Your Options And Potential Consequences From Lease Termination
When going into lease termination, it’s important to understand there may be consequences. When you terminate a contract early, this is something you need to be prepared for. Your lease agreement might list the potential repercussions, such as early termination fees or remaining rent payment.
Ways To Mitigating Damages
Mitigating damages is a way to make sure that despite the lease ending early, you’re looking out for the best interests of both parties. This can help manage the damages caused by breaking a commercial lease agreement as you’re trying to reach a fair solution instead of just getting out of a contract as fast as possible.
Negotiating Termination Fees
Termination fees don’t have to be set in stone – you can negotiate with your landlord to lower them in exchange for something that might benefit them.
Reaching An Amicable Resolution
Ending a lease early doesn’t mean there needs to be hard feelings between you and your landlord. Maintain a professional and respectful approach throughout the negotiation stage and listen to your landlord’s concerns – then you might be able to come up with a solution that works for everyone.
When Seeking Legal Assistance Becomes Necessary
Despite your best efforts, things can still go south. Complications such as unreasonable demands from your landlord or disputes over lease interpretation can make the negotiations go downhill pretty quickly.
When matters aren’t going well, it’s important to seek the assistance of a legal expert. A legal professional understands your rights, can properly interpret the lease agreement and is well equipped in negotiating a solution that is best for all parties involved.
Our legal team at Sprintlaw are happy to help with this – we’ve written more about this in Your Guide To Commercial Lease Agreements, check it out to learn more.
Leveraging Local Laws and Regulations
Understand that you have rights as a lessee. A commercial lease agreement cannot go against Australian legislation and common law principles. Therefore, it’s important to chat with a legal expert to make sure your commercial lease agreement is upholding your rights as a lessee.
Importance Of Early Legal Intervention
Getting a legal expert to help out right from the start can save you a lot of trouble and make the process of breaking a commercial lease agreement much easier. We’ve listed a few things a legal expert can help you out with.
Avoiding Costly Mistakes
Commercial lease agreements can be complicated documents. Often, it takes a trained eye and mind to understand them completely. Without seeking expert advice when it comes to your commercial lease agreements, you could be overlooking important clauses that help secure your rights.
Building A Stronger Negotiating Position
Having strong negotiation skills isn’t something that just happens overnight. It takes time and practice to become a good negotiator. If you’re not experienced with commercial lease negotiations, then it’s best to enlist the help of someone who is – especially if this is your first commercial lease negotiation.
Why Work With Sprintlaw?
Getting out of a commercial lease agreement is serious business. It’s important to have legal experts that know exactly what they’re doing in your corner.
Experienced Business Law Specialists
Don’t just get any lawyer, make sure you have an experienced commercial lease expert helping you every step of the way. Our specialist commercial lease lawyers are highly trained and ready to help you.
Cost-Effective Online Legal Solutions
When you’re running a business and juggling life, it’s not easy to take the time to see a lawyer. We get that – that’s why we built an online business law firm. Our online lawyers are ready to talk when it is convenient for you. Plus our fixed fee legal packers means you’ll always know what you’re getting and for how much – no billable hours to worry about.
Navigate Your Lease Termination With Confidence
If early lease termination is done well, it can be a huge relief of your shoulders. On the flip side, fumbling your lease termination could be an additional headache when your business is undergoing a tough time. With the right legal help from Sprintlaws experts, you will be able to navigate lease termination with confidence.
Trying to get out of a commercial lease? Let our contract expertise help you. You can also reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.
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