Sunday, May 10, 2009

Can I Get Out of a Commercial Lease?

Dear Property Manager:

I and leasing a commercial property in Boone and business has slowed down quite a bit in the last year. I am looking at cutting costs, and my lease in my biggest expense. I do not think that I need as much space as I needed a year ago, and by moving into a smaller space, I will be able to save money.

Is there a way that I can get out of my commercial lease?

Rob K. Boone, NC

Dear Rob,

The answer is "it depends." Your lease may allow you to sub-lease. If this is the case, it is usually the easiest and best way to get yourself out of that space. You will still be obligated to pay the rent, but your tenant will hopefully be paying the full cost. If you are able to do this, you will probably have to get your landlord to approve the subtenant, so check with them before you go down this road.

The other two options require that you directly negotiate with the landlord. The first is a "buy-out" option where you offer to pay a negotiated lump-sum payment to the landlord, less than your remaining payments, but still more than just the next month's rent. This option may work depending on how flexible the landlord is and whether they feel they will be able to fill the vacancy quickly.

You can also work with the commercial property landlord, letting know that the payments have become a hardship. Given the current economic situation, your landlord may choose to work with you to get you into another smaller space, or even let you stay in the current one, at a reduced price, instead of risk you defaulting on the lease and then not being able to find a new tenant right away. The key is being honest about your situation and being willing to negotiate, perhaps increasing the term of the contract.

We wish you the best of luck, and continued success.

Property Manager
Boone, NC

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