Is it Possible to Break a Commercial Office Lease?

In a nutshell NO in most cases, however if you think you will need to later on negotiate options up front….BEFORE signing an office lease contract.  A commercial office lease is a binding contract.  Once you sign that contract you are required to pay 100% of the rents due for the entire lease term.  However, sometimes a business owner or company gets into a position where they need to get out of an office lease contract.  They are either going out of business, need to downsize, or have outgrown their existing office space and their building doesn't have any other available space.

Whatever the reason it's important for you to think about this before signing the contract.  Many startups when leasing space have a hard time committing to a long term lease because they don't know if they will be in business 6 months later OR they could outgrow their space in the same time.

Breaking a commercial office lease cannot be an afterthought.  If you are unsure what the future holds for your company then you must negotiate UP FRONT some sort of option to get out of the lease if needed.  Below are a few options to consider.

Option to Sublease

Subleasing is one way to alleviate your rent payments on your space, however keep in mind that in this situation you become a sub-landlord and are still ultimately responsible for the lease.

Most boiler plate office leases will have some sort of language about subleasing and assigning however make sure you read this thoroughly and are ok with it.  This is a negotiable item!  Don't just assume the landlord will let you do it later on.  Is there a fee?  How much notice do you have to give?  What is the approval process?  What happens if your company is acquired or you merge?  What happens if the majority stock holder changes?

There are a lot of terms and conditions you or your lawyer must read and understand and make sure they are inline with your current and future business needs.

Office Lease Buyouts

Office lease buyouts are possible however can be difficult depending on the landlord, current market conditions, previous tenant improvements, remaining lease term, other rent concessions you may have received, and the cost to replace you with a new tenant.

Again, negotiate this up front if possible and necessary for the business.  If you sign a lease in a bad market (meaning low rates) and want to buy out a few years later in a good market (high rates) you have a better chance to being able to buy out.  The reason is the landlord will be able to replace you with a new tenant who ends up signing a lease when rates are higher, thus making more money.

Office lease buyouts can be difficult or in many cases not possible however under the right conditions can be done.

Are you needing to break your commercial office lease?  If so give us a call and we can help.

 

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