Signing a commercial lease provides more flexibility than purchasing commercial property. Business leaders aren’t forever locked into the same location. However, it is still a long-term commitment with major implications for the business.
Many commercial leases require that the tenant pay rent for multiple years. They may be liable for rent even if the company fails or moves out of the space. Leases may last for two, three, five or more years. In some cases, businesses may fail before the lease ends. Other times, the business may need to move to a different location or a larger space.
The landlord could demand payment for the full value of the remaining months or years of the lease. As such, commercial tenants may want to include provisions in their leases that protect them in case they need to terminate the lease early.
What options are available?
Commercial leases can contain several different provisions that can be beneficial for new or growing businesses. Lease assignment clauses are common. They allow a tenant to theoretically locate another business to assume their lease if they shut down the company or need to move to a different space. Landlords might prohibit lease assignment or restrict it in certain cases.
Adding a force majeure clause to the lease could also be helpful if the business fails for reasons outside of the owner’s control. A force majeure clause might allow them to terminate the lease early if extreme circumstances, such as natural disasters, acts of terrorism or war, prevent their company from continuing to operate.
Including appropriate provisions in a lease can help protect a business tenant from financial liability if they must terminate a lease early. Those attempting to negotiate and evaluate commercial leases may need help ensuring that terms are balanced and reasonable, and that’s okay.
