As a tenant, your lease grants you an exclusive right to occupy a property for a fixed period of time. You are ‘tied-in’ during that time, which is great if you’re trading well and your business is profitable.
But what happens if you’re struggling to make ends meet? The thought of paying rent for another two, three or four years will, in some cases, feel like a prison sentence! So, how do you escape?
- Break clause – the first place to look would be within your own lease. If you were cautious/prudent from the outset, the chances are you may have negotiated a break clause. This would give you an opportunity to terminate the lease on a specific date provided you comply with certain conditions. A word of warning – exercising a break is often more difficult than it sounds (see our earlier Blog on the pitfalls of break clauses).
- Surrender – you could approach the landlord and simply offer to hand the lease back to them. Unfortunately, it’s not quite as easy as returning the keys, as the landlord is not obliged to accept your surrender. Of course, they may choose to accept it if they have another (better) tenant lined up, but in most cases you may have to entice them to take the premises back off your hands. The promise of a cash lump sum is usually the best way to get the landlord’s attention!
- Assignment – this is where you transfer your lease to a third party, assuming you can find somebody who is willing to take it off your hands. Even if you do find a willing third party, the landlord will have to approve them before they can take your place and in all likelihood you will be expected to act as their guarantor. This is as close as you can get to washing your hands of the lease completely (without a break clause or surrender).
- Underletting – this is where you find a third party to occupy all or part of the premises and you become their landlord. You still remain on the hook under your own lease, but you effectively shift most of the responsibilities on to somebody else. Again, in most cases the landlord will have to approve the incoming party, but once you’re over this hurdle you can turn your attention to collecting some rent (rather than simply paying it!).
These are just some of the ideas and options available to you if you’re genuinely struggling with a lease. Whatever you decide to do, it is critical that you document your arrangements clearly.
Whether you’re a tenant or a landlord, let us know your thoughts or previous experiences, email firstname.lastname@example.org.