The impact of COVID-19 has been significant on almost every business in the UK. For many office based businesses remote working practices mean that they may no longer require the same amount of office space. In some cases therefore, it may no longer be commercially viable to pay expensive rent on office space that is only used sporadically and rarely at capacity.

There are other reasons too which influence when companies need to change their office space, including expansion or relocation.

The consequence of all of the above is that a company may want to exit their current commercial lease earlier than planned. If this is the case there are several options which may be available to tenants:

Can you get out of a commercial lease early?

A commercial lease is a binding contract between a landlord and tenant. It gives security to the tenant in that they can (subject to abiding by the terms of the lease) remain in the premises for the full term. It gives the landlord security in that they will get rent from the tenant for the term. Unless your lease has an early termination clause (a break clause), you do not have any automatic right to surrender it unless you can come to a commercial agreement to do so with your landlord.

Break clauses

If your lease contains an early termination clause (known as a ‘break clause’), these normally offer either both landlord and/or tenant the opportunity to terminate the lease on a predefined date.

A break clause will normally contain strict conditions which must be observed for the break notice to be valid. These can include how long before the break date you have to give notice, how you must notify your landlord and if you need to provide strict vacant possession. If you do not abide by all of the requirements, this could result in the break notice being held as invalid and you would be tied into the remainder of the term of the lease.

Agreeing to surrender

Some landlords may be sympathetic to your situation and reasons for needing to surrender your lease, in which case they may be willing to agree to surrender your lease in exchange for payment. It may be that the landlord already has new tenants lined up or they want to occupy the property themselves, in which case a deal can be done. The Landlord doesn’t have to agree to surrender your lease and will only normally do so, if it is in their interest i.e. they won’t lose out financially.

Transferring or underletting to another Tenant

If there is no break clause in your lease and your landlord is unwilling to accept a surrender, it may be possible to transfer the lease or grant an underlease underlet to a new tenant. You will normally be responsible for finding this new tenant, which the landlord will need to give prior approval to.

If you do transfer or underlet the property, you will still retain some liabilities in relation to your lease. In the case of transferring the lease, you would normally be required to become a guarantor of the new tenant. In the case of granting an underlease, you will retain your lease and its responsibility to pay rent, although you can offset this against the rent you collect from the new tenant.

As illustrated there may be various options to exiting your current lease, some of which are more advantageous than others. For any help or advice in relation to this or for any commercial property matter, please contact Chris Waddingham on 0113 284 5105 or alternatively by email chris.waddingham@isonharrison.co.uk