When you sign a commercial lease agreement in New York, you are generally expected to abide by it. However, there are ways to break the lease agreement without being in the wrong. Every case dealing with lease agreements is different, but there are some general guidelines for early termination.
Breaking a commercial lease early can be a complex process, often accompanied by significant penalties. Commercial leases are long-term agreements with legal obligations that can be challenging to navigate. When a business decision necessitates an early exit, understanding the lease terms and exploring options like a commercial lease buyout is essential. The legal nature of these leases requires careful consideration and often the assistance of an attorney to negotiate a favorable outcome.
There are ways to legally break a commercial lease without incurring penalties. Reviewing the lease terms for early termination clauses, proving a breach of contract by the landlord, or negotiating with the landlord can provide solutions. An early exit strategy might involve finding a new tenant to take over the remainder of the lease or negotiating a settlement. Understanding your rights and obligations, and seeking legal advice, can help minimize financial impacts and secure a smooth transition for your business property needs.
If you have questions about breaking a commercial lease or are facing litigation over it, you need a skilled New York business lawyer. Find out why companies trust Rosenbaum & Taylor.
The First and Possibly Easiest Method: Ask
Not too many commercial tenants think to simply request an early termination of their leases. But you can always ask the landlord to allow you to break the lease.
If the landlord agrees to it, you will likely want to memorialize that agreement in some written form. This prevents the landlord from later falsely claiming that you broke the lease without permission. Also, you should expect the landlord to request a fee to terminate early.
Other Ways You Might be Able to Break the Lease
Bear in mind that every business owner, and every commercial landlord-tenant relationship, is unique. Before taking any of these steps it would be a good idea to speak with an experienced New York business lawyer.
With that in mind, here are some potential ways to end your lease early.
Early Termination Clause
The lease agreement itself may contain an express clause that permits early termination if certain conditions are met. As with asking the landlord, one of those conditions may be the payment of a fee. Other conditions may include if the business folds or its financial status changes for the worse.
An early termination clause in a commercial lease agreement allows a tenant to legally end their existing lease before its expiration under certain conditions. This clause typically outlines specific requirements, such as paying rent for a set notice period, reimbursing the landlord for unamortized expenses, or fulfilling other obligations related to the property and services. The clause may also specify any future rent owed or penalties for early termination, providing a structured method to exit a long-term lease without facing extensive legal and financial repercussions.
Breach of Contract
The landlord is bound to perform certain duties under the terms of the lease agreement. These may include making repairs or performing maintenance. If the landlord fails to meet its obligations, the tenant business could have grounds to break the lease. But be sure to read the agreement before doing this, as written notice will likely be required first.
Utility Interruptions
If water, electricity, or other utility services are interrupted, the landlord should have these restored as early as possible. Your business relies on these utilities, and without them, you can’t operate. Depending on how long the utility interruption lasts, you may be entitled to eventually break the lease.
As with these other methods, this is not an absolutely guaranteed way to legally terminate the lease. Ask a New York business law attorney first.
Contingency Termination
Some leases contain contingency provisions, meaning that if a certain condition is not met, the lease can be broken. A classic example is a business that needs a license (e.g. to sell liquor) to operate. If the business tenant cannot, with reasonable efforts, obtain a certain license or permit, termination might be allowed.
The landlord may require proof that the business did in fact make reasonable efforts to obtain the license or permit.
Frustration of Purpose
This occurs when a change in circumstances makes one party’s performance of the lease agreement virtually worthless to the other. For example, a landlord and tenant may agree that the tenant will use the premises for office space.
The certificate of occupancy, however, might be for exclusive residential use. If the landlord refuses to amend the certificate of occupancy, the court might determine there to be frustration of purpose. This could allow early termination.
Impossibility of Performance
There may be circumstances in which it is impossible for the business to operate. As an extreme example, suppose the commercial property is destroyed in a major storm or by a fire. Impossibility doesn’t merely mean that it is financially difficult for the business to operate. Performance must be objectively impossible.
Because courts are reluctant to allow this as a basis for early termination, ask a New York business lawyer before invoking it.
Filing for Bankruptcy
Filing for bankruptcy will probably end your obligations under the lease. But the bankruptcy filing must be done in good faith and not simply to escape contractual duties under the lease agreement. Check with an attorney to be sure.
Here to Help With All Legal Aspects of Your Commercial Lease
In conclusion, navigating the complexities of breaking a commercial lease and managing lease obligations, including rental payments, can be daunting. Whether considering a commercial lease buyout or negotiating an early exit from your current space, the specifics of your circumstances and premises are critical. The experienced attorneys at Rosenbaum & Taylor can provide expert guidance and negotiation support, ensuring you handle these matters efficiently and legally.
To learn more about ending your commercial lease, reach out to us today.
