Betty, Neuman & McMahon, P.L.C.

Breaking your commercial lease can bring trouble

Breaking a commercial lease may be an intimidating prospect. Whether you are a long-term tenant or your lease is relatively new, you know that breaching any contract puts you at risk of legal and financial consequences. As a business owner, the cost of such things may be more than you want to pay.

Nevertheless, you may be facing a situation where breaking your lease is unavoidable. Perhaps your business is no longer lucrative, and the time has come for you to close your doors. More positively, your business may be thriving, and you have found commercial space that is more suitable to your expanding needs. Your priority now is finding a way to get out of your lease without facing substantial consequences.

Can you avoid penalties?

The first place to seek answers may be right in your lease documents. You may find details of the kinds of penalties your landlord requires of tenants who leave before the terms of the lease are up. In addition to financial penalties, your landlord might report you to a credit agency, retain your security deposit or take you to court for breach of contract. Some ways you may be able to avoid those consequences include:

  • Subleasing: Your contract may forbid this, but if it doesn't, your landlord may allow you to find another business to fill your vacancy. Even if your lease does not allow subletting, you may be able to persuade your landlord to grant permission to do so.
  • Negotiating: You may be able to avoid the most serious consequences of breaking a lease if you give your landlord plenty of notice.
  • Modifying: If you are on favorable terms with your landlord, you may be able to obtain a modification of your lease, shortening its duration or amending language referring to penalties for vacating early.
  • Bargaining: Any negative experiences you have had during your tenancy may be bargaining chips. For example, if your landlord failed to make repairs or correct safety violations, you may be able to suggest that your landlord already breached the contract.

Of course, when you vacate, you should ensure the property is empty and clean according to the specifications in the lease. This could improve your chances of getting back as much of your security deposit as possible.

Knowledge of the laws regarding commercial landlords and tenants will be helpful. You may find it in your best interests to consult an attorney whose experience in commercial real estate could help you navigate your situation.

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Betty, Neuman & McMahon, P.L.C.
1900 East 54th Street
Davenport, IA 52807

Phone: 563-326-4491
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