If you are thinking about the process by which a commercial lease can be terminated, or the process of transferring a commercial lease to someone else, this is the right blog for you.
There may be a range of reasons for you to want to transfer your commercial lease to someone else. Perhaps you need to rent a new property because your business is looking to grow and develop, and your current trading space is no longer suitable. This means you want to terminate your current commercial lease.
This article will help you understand commercial leases, how to transfer them or terminate these contracts.
Is it possible to transfer a commercial lease?
One option you have as a tenant if you want to end your commercial lease early is assigning or transferring a commercial lease to someone else.
This involves sub-letting the remainder of the lease to a third party. Transferring a commercial lease to someone else might be useful for you if your lease does not have a break clause.
It is important that you check through the lease, in case subletting or assigning a commercial lease is restricted before starting the commercial lease transfer. You will also need to talk to your landlord to get permission to transfer or terminate the contract early before you start the process of sub-letting.
The landlord will typically request a reference from the tenant for the third party, and the landlord also has the power to refuse consent if the third party cannot provide a reference. However, the landlord owes a duty to the tenant to give consent unless it is reasonable not to.
How do I transfer a commercial lease to someone else?
In order to transfer a commercial lease, you will likely need to obtain the landlord’s permission. Failing this, you might be liable to face financial penalties.
An assignment of a commercial lease is not always permitted by the landlord. They may refuse on the grounds of the protection of the property, if the new tenant has not provided adequate references, or if the landlord is concerned about finances.
It is recommended that you seek legal advice before taking any action towards transferring or assigning a commercial lease because if the property is assigned to someone else without your consent, you may still be liable for rent and breaching a contract.
If you have obtained permission from the landlord to transfer the commercial lease, you will receive a document - the Licence to Assign - from the landlord’s solicitor. If your landlord
refuses to consent, you can appeal to a court if you deem the reasons for this refusal unreasonable, but this can be very expensive.
Can I get out of a commercial lease?
As detailed above, speaking with the landlord and reviewing the terms and conditions of the lease, as well as providing a third party who is ready to accept the transfer of the lease, will assist in determining how a tenant can get out of the commercial lease.
These are some strategies for terminating a commercial lease:
● a legal break in the lease (break clause), gives both landlord and tenant the opportunity to terminate the lease after a period of time that has been laid out in the contract. A notice period may be required to meet the clause requirements
● the landlord may be open to negotiating a lease exit with the tenant. This could mean the tenant has to pay to end the lease
● paying a fee for an early exit, such as for professional or legal advice from solicitors for the tenant and the landlord. This may also involve proposing a sum to terminate the lease, perhaps by demonstrating to the landlord that they would be better accepting the payment as the business cannot keep up with the rent
● the tenant may be able to assign the lease to someone else, a third party who meets the requirements of the landlord.
● subletting a lease may be a good way to terminate a commercial lease, as rent from the new tenant will cover the original tenant’s own financial obligations. The original tenant would take on more responsibility in managing the property and helping out the sub-tenant if they have concerns.
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