How do you surrender a lease?
With the continuing impact that the COVID-19 pandemic has had on businesses, more commercial and retail tenants are now considering giving up their leased premises or relocating to a smaller and cheaper location.
However, ending your lease can be fraught with challenges.
What is a lease?
A lease is a legally binding agreement between a landlord and tenant; the tenant has the obligations to comply with the agreed terms including to make rental payment until the end of the lease, while the landlord has obligations to ensure the premises are fit for purpose.
Before taking any action to surrender a lease, the first thing you should do is to review the terms of the lease or seek professional advice, as there may be procedures on what you must do prior to ending a lease.
What is a surrender of lease?
A surrender of lease is a formal agreement detailing the mutual agreement between the landlord and tenant to end the lease. In some circumstances a deed is required to record the party’s intentions and the liabilities of each party.
If you have a registered lease on title, you should also register the surrender of lease which will remove your lease from title.
Should I get legal advice?
In most circumstances it is appropriate, and in your best interests, to get professional legal advice.
As the tenant will need to obtain the landlord’s consent to end the lease, the tenant will have to negotiate with the landlord about the terms of how the surrender of lease will be performed. Given these negotiations are routinely complex in nature, and usually only compound an already difficult and stressful time due to a possibly failing business, it is appropriate that a tenant seek legal advice, even where they believe they have a good relationship with the landlord. A lawyer can not only alleviate and reduce a tenant’s current burdens, but will also ensure any further obligations following the surrender are clear, understood, and are a true representation of the tenant’s intention.
Commonly, the most overriding element of the negotiations is the amount of money the tenant will be liable for in exchange for the landlord’s consent.
In addition to rent and outgoings, you ought to be prepared to contribute towards the loss of rental income in not leasing out the property together with associated marketing and administrative costs.
Tips for negotiating a surrender of lease
Before taking steps to surrender a lease, you should consider the following tips:
the date you intend to surrender;
will you be responsible for rent or outgoings, if so, for how long;
will you be entitled to receive your guarantee, bond, or security deposit;
who will pay any legal fees arising from the surrender.
If you are considering surrendering your lease, Longton Legal’s property and commercial teams are more than capable and ready to assist.
*Disclaimer: This is intended as general information only and not to be construed as legal advice. The above information is subject to changes over time. You should always seek professional advice beforetaking any course of action.*
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