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Negotiating early exit provisions in commercial leases

On Behalf of | Aug 10, 2016 | Landlord / Tenant |

When renting a commercial space, there are many times when it may become necessary through the course of business to leave your lease prior to the expiration of the term. It is difficult to anticipate the reasons why you may want to make an early exit from a lease, but that shouldn’t keep you from planning ahead for the possibility. Exiting a lease ahead of time is always easier and less costly if you have planned ahead.

The first and best course of action for giving yourself easily accessible exit strategies when leasing a commercial property is to literally build them into your lease agreement. When negotiating the lease before assuming tenancy, consider amending the agreement to include a clause that specifies you are allowed to exit the lease early if your business has not reached defined profit projections by certain timeline milestones. Often these early exit opportunities are easiest to incorporate at the six-month or one-year anniversary of the lease-signing.

You may also consider negotiating pre-determined resigning options to keep lease payments low while giving you early exit options. Practically speaking, this generally means a one or two-year lease agreement with the option to renew for a predetermined lease amount for an additional two or three years.

Whether you choose one of these options or another course of action when negotiating your commercial lease, it is important to negotiate terms which grant leverage in your favor. It can be difficult to know how exactly to craft agreements which are both mutually beneficial enough to be agreeable to the landlord while being written in your favor. The assistance of an experienced real estate attorney can help ensure that your rights are protected, and you wind up with a well-craftied agreement both amenable to all parties and airtight to compromising loopholes that could potentially harm your interests.

Source: Entrepreneur, “Getting Out of a Commercial Lease,” Jeffrey Steinberger, accessed Aug. 11, 2016