How To Lease Good: 'early release' from a warehouse, office or retail lease – advice for commercial occupiers.
Tenant Leasing Group (TLG) is a commercial property advisory specialised in sourcing and lease negotiation for Warehouse (2,500sqm +), head Office, and Retail (multi-site) in Australia and New Zealand.
Circumstances change. Navigating this requires strategy, and tact.
In this edition of How To Lease Good (#HowTLG), we look at how tenants may be able to end a commercial property lease early – before the end of the lease term.
There are a variety of reasons a business may want to leave a property – months or even years before it is due to expire. Here’s what you can do about it.
Sometimes, a landlord will let you leave early, and in some cases, this may occur without penalty. Typically, this happens when they either have a redevelopment of the property planned or if they have another tenant that wants to expand in the space.
However, what is more likely is that early release incurs a financial penalty or will only be granted if the tenant fulfils certain conditions.
Tenant Leasing Group (TLG)can assist in assessing the feasibility of an early exit and guide you through the negotiation process. Whether it’s negotiating a reduced penalty, providing ample notice, or exploring alternative arrangements, we work to minimize the impact on your business.
Effective communication with the landlord is key during this process. Expressing your reasons for the early exit and maintaining transparency can facilitate a smoother negotiation. Our team is well-versed in navigating these conversations to achieve optimal outcomes for our clients.
Subleasing or Assigning your lease
Another strategic option for businesses seeking to leave a lease early is subleasingor assigning the lease. This can allow tenants to transfer their lease obligations to a new tenant, providing a viable solution without prematurely terminating the agreement.
Some commercial tenant advisory services can facilitate subleasing and lease assignment transactions. By way of example, TLG is able to assist in identifying potential subtenants, negotiating terms, and ensuring compliance with the original lease agreement.Subleasing not only allows you to fulfill your lease obligations but also provides an opportunity to recoup some of your rental costs.
Before proceeding, it’s crucial to review your lease agreement to understand the landlord’s conditions regarding subleasing or assignment. Our advisory team can guide you through the legalities, help draft necessary agreements, and ensure that the transition is seamlessfor all parties involved.
A buy-out involves negotiating with the landlord to secure an early termination by paying a lump sum or agreeing to specific financial terms. In certain scenarios, businesses may find that is the most viable strategic option.
The first step is a meticulous review of your lease agreement to identify clauses related to early termination and buyout provisions. In conjunction with chosen legal experts,TLG excel in navigating these complex documents to determine the feasibility of a buyout.
We can then handle the negotiation – formulating a compelling case for the buyout that speaks to changes in business circumstances, market conditions, or the potential benefits to the landlord.
Further, we conduct a thorough cost-benefit analysis to ensure that a lease buyout is financially sound for your business. This includes evaluating the buyout cost against potential savings and benefits derived from early termination.
Alternatives to leaving – ways to stay
Renegotiating your lease
Changing market conditions, business growth, or shifts in strategy may necessitate a reassessment of your current lease terms – even before the lease expiry date.
Renegotiating your lease provides an opportunity to align the agreement with your evolving needs and potentially improve upon existing conditions – whether by adjusting rental rates, modifying space configurations, or renegotiating lease duration.
This is an opportunity to make sure the deal you’re getting works for you and your business’ needs.
Shrinking the space
As an alternative to moving out altogether, you could talk to your landlord about reducing the size of your spaceand redrawing up the lease agreement with these new specifications.
An alternative to redrawing the lease contract in this way may be to organise a partial sublease of your space – rather than leaving entirely, this may allow you to reduce the size and cost of your occupancy while staying at the same location. Tenant Leasing Group (TLG) can offer advice about partial subletting.
To conclude, exiting a lease early requires careful consideration and strategic planning.By proactively taking the above steps, you can get informed about your options and find the best solution for your business.
Are you thinking you might want to leave your lease before term? tl-group.com.au/contact
TLG has 50 years’ experience handling ‘early releases’ from commercial lease agreements on retail, office and warehouse property. Speak to a commercial tenant advisor today.
#HowToLeaseGood is a series about Warehouse, Office and Retail property leasing. Find the right sites, sign the best deals.
Check out other articles in the series:
Tenant Leasing Group (TLG)
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