COVID-19 has had a significant impact on almost every business in Scotland. For many businesses, it means they no longer require their business premises or can no longer afford them. There are of course many other reasons, not directly related to COVID-19, that you, as a commercial tenant may wish to exit a commercial lease. Perhaps operations have downsized or expanded and the place is no longer fit for purpose, or business needs demand a change of location. Regardless of the circumstances, if you need to get out of a commercial lease early, there are options which may be available to you.
In this article, we look at the factors which may affect whether you can get out of your commercial lease before the lease term.
Is it difficult to get out of a commercial lease early?
Getting out of a commercial lease early can be challenging - after all, the contract is designed to give the landlord an element of security and assurance. Whether you are able to end the lease early will generally depend on the terms of your lease, but you may be able to come to an agreement with your landlord.
Renunciation
If you have a good relationship and have been a reliable tenant, your landlord may be sympathetic to the situation and you can come to an agreement. You may be expected to pay a certain amount of financial compensation for renunciation of the lease. However, if your landlord is unwilling to come to such an arrangement, there may be other formal legal options available to you as the tenant.
A break clause in the lease
Many leases include what is known as a ‘break clause’. This clause offers both landlord and tenant the opportunity to bring the lease to an end after a predefined amount of time. Your solicitor can check your lease for a break clause and explain how this might operate in your favour.
If there is a break clause in your lease, you will need to adhere to its terms which may stipulate a period of notice and how you should notify your landlord. For example, you may need to provide your landlord with several months’ notice in writing, or you may need to notify your landlord at a specific address. Your rent and other obligations may also require to be up to date. These requirements must be met as failure to do so could invalidate your exit from the lease.
Assignation
Where there is no break clause in your lease and your landlord is unwilling to negotiate the renunciation of the lease, it may be possible to assign the lease to a third party. You will generally be responsible for finding a suitable alternative tenant to take on the lease, and the landlord must approve the third party before the lease can be assigned.
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Whether as a commercial landlord or tenant requiring advice on the above or any other aspect of commercial property, please get in touch.
