How can you get out of a commercial lease?

Given the current economic and business environment with Covid-19 and the possibility of a recession or worse, it is important to know what are the options open to tenants/lessees to get out of or end a commercial lease.

It is not generally possible to just walk away from a lease.

Some of the options to ‘get out of a lease’ include to:

1 Terminate the lease. A lease may have a termination clause or break clause that can enable early termination. Careful examination of such clauses is important. There may be costs associated with exercising rights under such a clause.

2 Surrender the lease. A lessor and lessee can by mutual agreement end a lease. The terms of the surrender can be negotiated. Costs may be involved. A deed of surrender can be prepared. If properly prepared the deed can bring to an end the lease obligations.

3 Assignment of lease. A lessee can transfer its rights and obligations to a new lessee. There may be a provision in the lease which enables this to be done. The lessor’s consent may be required. There is often a provision that says that a lessor cannot unreasonably withhold consent.

4 Subletting a lease. Part or all of the premises may be capable of being sub-let.

5 Licensing. A lessee may agree to licence part of the premise. Normally a licence does not enable exclusive use of a premises.

It is important to obtain prompt legal advice regarding your options. For an obligation free consultation please call Steve McAuley on (02) 9633 1826 or email stevemcauley@mcauleyhawach.com.au.
By Steve McAuley, Accredited Specialist – Commercial Litigation
McAuley Hawach Lawyers
11 Fennell Street, Parramatta NSW 2124
Telephone: (02) 9633 1826
Web: www.mcauleyhawach.com.au
Email: reception@mcauleyhawach.com.au
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