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Breaking your commercial lease without breaking the bank

On behalf of Kadish & Associates Law Group posted in blog on Wednesday, March 14, 2018.

When you signed the lease for your commercial property, you may have experienced some trepidation. What if your business didn’t do well in that location? What if you needed to expand before your lease expired? Were you really ready to sign a long-term commitment? Now that you find you will not be able to honor your lease, you certainly have concerns about the legal ramifications of breaking it.

If you are moving out because your business is doing well, you probably don’t want to pay rent on two locations until your lease runs out. If you are moving because your business is closing, continuing to pay the lease or the penalties for breaking it may be more than you can handle at the time. However, there may be options available that will minimize the financial burden of a commercial lease you no longer need.

Working with your landlord

Negotiation is the key, and while it may seem that you have no bargaining power, you may be surprised. Since the purpose of the lease is to prevent vacancies, your landlord may be open to any suggestions you make to keep the building occupied, for example:

  • Subletting your unit
  • Revising your lease to allow subletting if the lease does not already provide this option
  • Revising your lease to modify its duration
  • Negotiating for the forgiveness of any penalties for breaking the lease
  • Reminding your landlord of any building conditions or actions on his or her part that many constitute breach of contract

Your efforts to return the unit to rentable condition by careful cleaning may prove your good faith to your landlord. You may even be able to use your security deposit as a negotiating tool. Meanwhile, continuing to pay your rent until the situation is resolved will help you avoid further penalties or legal consequences. Additionally, having a thorough understanding of your lease terms and Arizona real estate law will be essential for negotiations.

If you are facing the possibility of legal action from a landlord because you want to break a commercial lease, you may wish to handle the situation in a dignified and civil manner. Instead of an acrimonious litigation, these matters can often be settled through mediation. Speaking with an attorney who supports alternative dispute resolution is an excellent way to begin the process. You may find that mediating with your commercial landlord is effective and less expensive than going to court.

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