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What if I need to terminate a commercial lease?

As a California business owner who rents your premises, you may want to get out of your lease early for a variety of reasons. Perhaps this location no longer works for you or you wish to pursue opportunities elsewhere.

Commercial landlords typically do not take kindly to the notion of a tenant breaking a lease. While you may eventually come to an agreement with your landlord that lets you out early, you can expect to pay a price. In other situations, the landlord might refuse to even consider a compromise. Either way, consulting an attorney can help you understand the options in your particular situation.

What does your lease say?

If you begin pondering the advisability of terminating your lease early, start by taking a look at the terms of your lease. Many leases include explicit provisions concerning what happens if you break a lease. Generally, while the possibility does exist that a court might find a provision unenforceable, commercial landlords have far wider latitude than residential landlords when it comes to imposing penalties and conditions.

Can someone else take over your lease?

One option you might consider is assigning the lease to another business willing to take over your premises. Again, do check your lease for limitations on lease assignment. Some landlords may require you to obtain their consent for specific prospective tenants. Others may include guidelines for acceptable types of tenants and formal requirements. Simply signing over your lease and walking away could ultimately cause you to remain responsible for rent and other expenses. Some landlords also put a recapture clause into their leases, stipulating that the landlord will terminate your lease as soon as you request approval for assignment or subletting.

What may you need to pay?

If you terminate your lease before it ends, you may expect to pay the landlord's damages. These typically consist of the rent for the period between your moving out and the next tenant moving in until the end of the original lease term. Landlords may also demand you pay the costs of finding a new tenant.

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