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Minimizing your penalties when breaking a commercial lease

Signing a lease for commercial property may have been an exciting moment. It likely meant that you were finally ready to take your business to the next level. While focusing on having a brick-and-mortar presence, a solid address and a location in which to grow your business, you also realized that signing a lease obligated you to certain terms during your presence at that location.

From that moment, something changed. For whatever reason, you need to break that lease. As a business owner, you are aware of the legal ramifications of breaking a contract. However, there are steps you can take that may limit the amount of damage you risk by trying to get out of your lease before the term expires.

Negotiation is key

There could be numerous reasons why you want your landlord to release you from your commercial lease. Perhaps your business has done so well that the current space is no longer adequate. Maybe the opposite is true, and you are simply not able to afford the remainder of the lease. There is also the possibility that your reasons for leaving the location are personal.

More important than the reasons bringing you to your decision are the steps you take in seeking release from your landlord. Your first step is to carefully review the terms of your lease and find the clause explaining the penalties for breaking it and your obligations under these circumstances. You may find these penalties are substantial, and your efforts should be to minimize the expense as much as possible, for example:

  • See if your landlord is willing to discuss a modification of your lease terms for an earlier expiration date.
  • Negotiate with your landlord for a lower financial penalty for breaking the lease, especially if you have had issues with the conditions or with the landlord's response to your complaints.
  • If your lease forbids subletting, request a modification.
  • Find a tenant to sublet your commercial space for the duration of your lease.

No matter how your negotiations with your landlord turn out, the reputation of your business may depend on your dignified exit. This includes providing written notice of your intent to vacate and leaving the property clean and in good condition.

Throughout the entire process, you would benefit from keeping records of your conversations with your landlord and the results of those discussions. You would also benefit from seeking legal advice from a California professional with experience in commercial real estate transactions.

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Kashfian & Kashfian, LLP
1875 Century Park E, Suite 1340
Los Angeles, CA 90067

Phone: 310-464-1145
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