Ending a commercial property lease early - What are the options?

Senior associate solicitor Gemma Stephenson, in leading Thames Valley law firm Blandy & Blandy’s  Commercial Property team, discusses the options if you are considering ending your Commercial Property lease early. 

Leases of commercial properties typically run for several years but a change in circumstances might mean that you find yourself in a position where you no longer require the use of all or part of a property which you currently let.

There are a number of options to be considered if this situation arises; which ones are available to you will be governed by your lease and any negotiations with the landlord.

If you no longer require any of the property:

Exercise of a break - Is there a tenant break clause which has not yet passed and for which you still have sufficient time to serve the break notice? If so, exercising the break is likely to be the best option as provided the notice is served correctly, this will allow you to walk away from the lease (other than end of lease repair/dilapidations). Legal advice should always be sought when exercising a break as the break clause must be strictly adhered to.

Surrendering the lease back to the landlord - a landlord may be prepared to negotiate a surrender where it is in their interest to do so. This might involve payment of a lump sum to the landlord or other incentives in return for them allowing the surrender.

Assigning the lease – you may be able to transfer the lease to a third party who will take over the lease and your obligations as tenant. Landlord’s consent will likely be required and there are commonly conditions attached.

Subletting the property - the party you let to would become your direct tenant and pay rent to you. This usually requires the consent of the landlord. You would still remain tenant under your lease and you will need to continue to comply with the tenant obligations, including the payment of rent.

If you don’t require all of the space but still use part:

Subletting part of the property – some leases allow subletting of part. As with a sublease of whole, the party you let to would then become your direct tenant and pay rent to you. The requirement for landlord’s consent and the fact you would remain the tenant under your lease will be as with subletting of whole.

Surrendering the lease and taking a new lease of a smaller area – as with a surrender of whole, this may be something the landlord is prepared to consider if it is also in their interest. The surrender should be entered into at the same time as the new lease of part.

A commercial agent will be able to advise on the terms which might be achieved for subletting, and which of assignment or subletting might be the best option if those are the options being considered.

If you need someone to review your lease and confirm which of the above options might be available to you, then please do get in touch with our Commercial Property team by visiting www.blandy.co.uk.