Tenants may be able to negotiate a deed of surrender with their landlord, bringing an early end to a commercial lease. A landlord may be amenable to a tenant surrendering their lease by deed if, for example, the market has improved since the lease was originally signed, and the landlord can expect to get a higher rent from a new tenant. Alternatively, faced with the reality of a tenant unable to fulfil their obligations, a landlord may agree to accept a financial premium to terminate a commercial lease before the end of the agreed term.
In certain circumstances a tenant may be able to assign their lease to a third party, or effectively sell it, and in the process dispose of all their liabilities under the agreement. If the lease terms are particularly favourable, the assignee may need to pay a premium to acquire the lease, or alternatively the original tenant may be forced to contribute to the assignee's rent for the remainder of the lease term, or otherwise pay a 'reverse premium', if the value of the lease has declined since the agreement was signed.
Tenants may also be able to sub-let their lease, with the landlord's consent, to a third party. The original tenant will remain liable to the landlord under the terms of the lease, and will sign a separate sub-lease agreement with the sub-tenant. Again, clauses in the lease may inhibit the tenant's freedom of action in terms of sub-letting, and a commercial property solicitor will be needed to examine the relevant terms in the lease document.
Finally, if negotiations with a landlord to end a commercial lease fail, and in the absence of other options, the tenant may simply decide to stop paying the rent. As long as there is no personal guarantor, the landlord will then be in the same position as other creditors with claims on a failing or insolvent business. This is obviously not an ideal solution for either party, but may be the inevitable result of commercial reality.
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