Many businesses lease their commercial space from a landlord. The terms of that lease can further a businesses' interests, or can become a hassle. In some cases, business tenants find that they can benefit from breaking their commercial lease.
WHY SOME COMMERCIAL TENANTS MAY WANT TO BREAK THEIR LEASE
Every business circumstance is unique. However, most commercial tenants generally want to break their lease for one of the following reasons:
- The business is being held back by the facilities
- The business is shrinking and no longer needs the space
- The lease has become too expensive for the business to afford
- The landlord is not upholding their lease obligations
The vast majority of the time, the choice to break a commercial lease is purely a business decision.
BREAKING A COMMERCIAL LEASE CAN HAVE PENALTIES
Breaking a lease, though, can come with steep penalties. When the lease was written by a lawyer, it will often lay out exactly what will happen if the lease is broken by the commercial tenant. If the lease does not say what will happen if it is broken, the landlord has rights that can let them:
- Repossess the property and evict the commercial tenant, often for failure to pay rent
- Terminate the remainder of the lease
- Demand a full payment under the lease, including rent for the time remaining on the lease
- Keep the security deposit
This can quickly run into the thousands of dollars and can imperil the financial well-being of even the most successful companies. Breaking a commercial lease can also tarnish the tenant's business brand and make it more difficult for them to secure a commercial lease in the future.
LANDLORDS AND TENANTS CAN NEGOTIATE THE END OF THE LEASE
Avoiding these penalties is almost always in the tenant's best interests. Landlords, meanwhile, rarely want to have to pursue a non-paying tenant and go through the legal system to enforce their commercial lease. Like most commercial lease disputes, both parties benefit from negotiating their differences, even if they are reluctant to deal with each other, again.
Lease negotiations can create solutions that end up being in the best interests of both the landlord and the tenant. For example:
- The tenant can make a lump sum, “buy-out” payment to end the lease
- The lease can be assigned or sublet to another business
However, there are times when wrapping up an ongoing lease is actually in the interests of the landlord. If the demand is high, they can agree to terminate the lease and take no action against the tenant in order to put the property back on the market at a higher price.
If the negotiation does not reach an agreement that satisfies both sides, mediation or arbitration might be the next step.
REAL ESTATE LITIGATION LAWYERS AT THE KATZ LAW GROUP SERVE MASSACHUSETTS
Skilled legal representation can help, regardless of whether you are a commercial tenant or a landlord leasing property to a business, or whether the lease has already been broken, the tenant is considering it, or the parties are trying to negotiate.
The real estate litigation lawyers at the Katz Law Group have nearly 40 years of experience representing both commercial landlords and tenants in Worcester, Framingham, Marlborough, Norfolk County, Middlesex County, and the rest of Massachusetts. Contact them online or call their law office at (508) 480-8202.