Can You Break a Commercial Lease Prior to Taking Possession?
Think twice before you sign on the dotted line. Once you enter into a contract, including a commercial lease, you may have trouble getting out of it. Generally, the lease terms control the rights of the parties to a commercial lease. You can only break a lease and avoid paying damages if the lease includes a provision allowing you to do so.
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Commercial Lease
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A commercial lease is a necessary part of most business plans. Unless you own appropriate real property, you likely lease business space. While landlords often impose printed contracts for residential tenants, commercial tenants thrash out the critical terms of the lease in negotiations. A commercial tenant only signs a lease contract if she had obtained acceptable lease terms. For this reason, many states offer few protections to commercial tenants who decide to back out of the lease before taking possession.
Contract Law
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Instead of relying on state protection, commercial tenants should look to their lease contracts to identify their rights and remedies. The courts treat the lease like any other contract, requiring only that the parties mutually agreed to the terms, that one party made an offer that the other accepted and that both received something of value in the exchange. If your lease fails one of these contract tests, it may not bind you. For example, if a family member offered you the premises for free and you signed a lease to that effect, the fact that the landlord receives no consideration makes the contract unenforceable.
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Lease Terms
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A commercial tenant seeking to exit from a lease should first read the lease carefully. Some leases contain language allowing either party a certain period of time (often termed a "grace period") to back out of the lease. Others allow a tenant to extricate herself from the lease by paying a reduced sum -- for example, several months rent. If your lease allows a similar procedure, you should use it. Otherwise, you remain liable for the rent for the full term of the lease unless the landlord finds another tenant.
Justifications
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Sometimes you have justification to terminate the lease. Contract law requires a meeting of the minds. If you and the landlord had different beliefs -- both reasonable -- about a material term of the lease, no agreement occurred and the contract does not bind you. If the landlord misled you about some material condition, you might terminate the lease on the basis of fraud. A real estate transaction attorney can help you figure out your options under state law.
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