Is There Any Way I Can Get Out of My Lease?

Economic times have been difficult for many businesses throughout Southern California during the past few years. In some instances it appears that the economy is on the mend; other times it appears the economy is getting worse. If your business is continuing to suffer, is there any way to get out from under what may now appear to be an unfavorable lease?

The short answer is that you are ultimately responsible for paying rent for the remainder of the lease term if you terminate the lease early.  However, there are some options if you find yourself in this situation:

• Ask your landlord if he has a smaller unit available that he can rent to you instead. Make sure to document your request in writing. This way, if your landlord ever sues you for rent owed on the remainder of your lease, you can show that you attempted to mitigate or reduce his damages.
• Find a suitable sub-tenant. You may have vacant office space in your unit available if you have been downsizing. Although you will need to obtain approval from your landlord for any subletting, most leases provide that the landlord will not “unreasonably withhold” consent.
• Find someone to take over your lease. For instance, you might want to try selling your business and having the new owner take over your lease. The landlord may be required (under the express terms of your lease) to consent to a lease assignment. Keep in mind, though, that most sophisticated landlords will require you to remain on the lease as a guarantor even if they accept the lease assignment. This means that you may be responsible if the new tenant fails to pay the rent. Consequently, you will want to make every effort to ensure that any prospective buyer of your business is financially sound.
• Renegotiate your lease to reduce your monthly rent. Although not legally required to do so, your landlord may be willing to cut you a break on the rent just to keep you as a tenant. It is tough out there for landlords to keep units filled in today’s economy. Some money is better than no money.
• In some situations, you may be able to terminate your lease if your landlord failed to perform his obligations (e.g., by failing to use your Common Area Maintenance fees to maintain the premises). If you think your landlord may have breached your lease, you should consult with an attorney.

Reid & Hellyer has extensive experience in assisting business clients in a wide range of business and real estate law issues, including landlord/tenant issues.