02 Mar Can a Commercial Tenant Walk Away From a Lease?
A commercial lease gives a tenant a right to occupy the premises for a specific duration. When a commercial tenant walks away from its lease, the terms and conditions of the lease agreement will continue to govern the relationship between the landlord and the tenant. Accordingly, even if a tenant gives up its right to possess a commercial space, that tenant will continue to owe rent and be bound by the other provisions in that agreement.
The commercial lease attorneys at New Jersey Eviction Law in Mount Holly represent commercial tenants in New Jersey that need to revise or end their leases before the expiration of the lease term. Our lawyers collectively have more than 50 years of experience in representing commercial tenants and in helping them to negotiate alternatives to breaking a commercial lease in ways that offer a favorable resolution for both the commercial landlord and tenant.
A commercial tenant might have reasons to walk away from a lease
A common cause for a commercial tenant breaking a lease early is an inability to continue to pay rent due to a business downturn or some related reason. Commercial rent payment and other lease obligations, however, will likely continue even if the tenant no longer occupies, wants, or needs the space.
This is true even if the tenant needs to walk away from a lease after outgrowing the space or if the space configuration and the tenant’s needs are no longer in sync. Rather than just abandoning the space, the tenant will be better served by retaining a knowledgeable commercial lease lawyer who can review the lease terms and conditions and develop a strategy to reduce or eliminate the tenant’s continuing lease obligations.
A commercial tenant may have viable alternatives to abandoning a lease
A commercial tenant who wants or needs to end a lease before its original term likely wants to stop paying rent, whereas a commercial landlord needs to keep revenue flowing from a leased space. Negotiated options that can help both parties meet their goals include:
- Subleasing of the commercial space, where the tenant may still be liable for rents but arranges for a subtenant to occupy a commercial space and to make regular rent payments
- Early termination agreement, where the tenant might pay a reduced amount of the remaining rent in exchange for the landlord’s agreement to end a commercial lease
- Lease workouts, where both parties amend the existing lease, for example, to relocate a tenant into an alternate location, to change exclusive use restrictions, or to add co-tenancy or financial reporting clauses.
Commercial tenants generally know that they will want or need to walk away from a lease at least several days or weeks in advance. They will have a better opportunity to avoid long-term liability for any remaining lease obligations when they engage the landlord in negotiations as quickly as possible, and before they abandon all of their rights to their leased property.
Commercial landlords in New Jersey should not allow damages from a lease abandonment to accumulate
When a tenant does walk away from a commercial lease, New Jersey law obligates the landlord to mitigate its damages, for example, by finding a new occupant for the abandoned space. In practical terms, this means that if a tenant does nothing and walks away from a 10-year commercial lease five years before the ten-year period expires, the landlord cannot just sit back and attempt to collect the full remaining five years of lease payments from the tenant. If another suitable tenant wants to take over the space, the landlord is expected to negotiate a new lease with that tenant.
Call the New Jersey Commercial Lease Attorneys at GLR&W LLC
We strive for an optimal and cost-effective solution that will benefit all parties to a commercial lease.