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Tips for getting out of a commercial lease

On Behalf of | May 24, 2016 | Commercial Real Estate |

The phrase “breaking a lease” makes the process sound negative and perhaps even illegal. For this reason, some experts suggest that tenants say they would like to “terminate the lease” instead. After all, you can legally do this in many situations, so that phrase better captures the reality of what you’d like to do. Below are some tips that can help if you’re negotiating to get out of the contract.

1. Find someone else to use the spot first. This takes all of the work away from the landlord, which he or she is going to appreciate. It also means that the landlord may simply get a new lease with no break in cash flow. Remember, that’s what landlords really care about, so they’ll be more likely to agree to your terms if you offer it to them.

2. Explain the benefits. If you know things are going south, you’re likely going to have to hold a sale and put up a sign saying you’re going out of business, which gives negative publicity to the landlord. If you terminate the lease and someone else signs on, things look upbeat and positive because the sign says “Coming Soon” with the name of the new business.

3. Think about choosing a different space the landlord owns. Perhaps he or she has 12 rental spaces, and you chose the most expensive one because you were overly optimistic. If you agree to enter a smaller, more affordable space, the landlord may be more likely to agree since he or she will not be losing your business.

No matter what tactic you use in California, make sure you also know every legal step that needs to be taken.

Source: Multi-Unit Franchisee, “Terminate Don’t Break: Termination Tips For Your Commercial Lease,” Dale Willerton, accessed May 24, 2016