What You Should Know About Breaking a Commercial Purchase Agreement

As a business person, securing a commercial lease is quite easy. However, you may face many challenges along the way and may be forced to end the lease before the term ends. Unfortunately, this decision causes substantial legal and monetary repercussions, including potential monetary damages and legal action by the lessor. Here's everything you need to know about breaking a commercial purchase agreement.

Various Reasons Why a Business Owner Would Break a Commercial Lease

There are several reasons why a business owner may choose to break a commercial lease. Here are some common scenarios:

Financial Difficulties

If the business is experiencing a downturn, the owner may struggle to meet the lease obligations, including the rental fees. In such a case, breaking the lease would be necessary to mitigate further financial losses.

Expansion or Relocation

Conversely, the business may turn out so well that the owner may need to expand to a larger space to accommodate growth. Perhaps you want to relocate to a place with more foot traffic. If the lease does not allow such changes, you may break the lease to find a more suitable location.

Lease Terms and Conditions

Unfavorable terms and conditions like excessive rent increases, restrictive clauses, or inadequate maintenance and repairs by the landlord can prompt a business owner to consider breaking the lease.

Changes in Business Situations

Circumstances that significantly impact the business's operations, such as a change in business strategy, a shift in market conditions, or the introduction of new technology, may lead a business owner to break the lease to adapt to the new circumstances more effectively.

Lease violations by the Landlord

Suppose the landlord fails to fulfill their obligations under the lease agreement, like providing essential services, maintaining the property, or resolving health and safety concerns. In that case, the business owner may have grounds to break the lease due to the landlord's breach of contract.

Personal Reasons

Personal circumstances like health issues, retirement, or the decision to pursue a different career path, could prompt a business owner to terminate the lease early.

It is important to note that it is not about returning the key to the landlord and walking away, regardless of the reasoning. Breaking a commercial lease without proper legal justification can result in financial penalties or legal consequences. 

There are many ways you can break a commercial lease early, and these are some of the most prevalent ones:

Mutual Agreement

You can negotiate with your landlord to mutually break the lease agreement. In this scenario, you may be required to settle termination payments and other damages.

Finding a Replacements

The landlord's major concern is obtaining returns on investments. So, as long as you assure the landlord of continued income while away, that is, by getting a replacement tenant, they will have no reason to object to the termination mid term.

Sublease

You can ask the landlord to sublease the property for the new business to complete the remaining lease term. Some commercial lease agreements have a sublease clause that is negotiable before signing.

What Can Happen When You Break a Lease Early

Breaking a commercial lease early will lead to significant consequences for you as the tenant, including:

• Loss of security deposit, which the landlord will use to cover any damages and/or outstanding rent – if any.
• The landlord may take legal actions to enforce the agreement or recover losses resulting from early termination.
• Difficulty in finding future commercial spaces since other landlords will see you as a high-risk tenant for terminating the lease agreement early.
• You will negatively affect your credit score, making getting lease deals or loans more difficult.

Logistical and Operational Costs of Breaking a Commercial Lease

Besides rent and damage costs, you will be forced to pay:

• Cost of advertising, finding a new tenant, and those mentioned in the early termination clause
• Legal costs, especially when not in agreement with the landlord
• Termination penalties
• Clean-up costs

Work with the Experts at Rochford Law

A commercial lease agreement is one of those binding contracts you can't walk away from without facing legal consequences. That's why you will need an attorney for legal advice on fulfilling your obligations under the lease. Our legal experts at Rochford Law will help you familiarize yourself with the lease terms and when your responsibilities end. 

Contact us today to schedule a free consultation.