Early Termination Letter of Commercial Lease

A commercial lease early termination letter is a communication a business tenant sends to a landlord to inform them of their desire to end the lease early. Even though a landlord isn’t required to comply, this letter lets the landlord know that the tenant isn’t happy with the arrangement and may encourage them to agree to the tenant’s request.

Can I Terminate a Commercial Lease Early?

It depends. You may be able to terminate your commercial lease early if your original lease agreement contains an early termination clause. Even though this clause may come with fees and penalties, it may be worth considering for your business’s prosperity in the long run.

Please review your commercial lease before sending an early lease termination letter to your landlord. Follow all protocols that your lease discusses. If your lease doesn’t address this topic at all, you can discuss your options with your landlord.

Common Reasons for Terminating a Commercial Lease Early

Explore some reasons a business tenant may want to terminate a lease early:

• The landlord’s lack of action: You may request early termination if the landlord is not meeting your expectations or fulfilling their end of the commercial lease agreement.
• Downsizing: Early termination may be desirable if your business is downsizing and requires less space. By terminating early, you may be able to save money and avoid spending on excessive amenities, services, and space.
• Increased business growth: If your business is growing and needs more space to conduct its operations, you may want to terminate early.
• Acquisition or merger: If you’re consolidating your business assets via an acquisition or merger, you may have duplicate office spaces you no longer need. In this case, you can request early termination.

What Are the Consequences of Terminating a Commercial Lease Early?

Here are some potential consequences of terminating a commercial lease agreement early:

• Loss of security deposit: You may not be able to recover your security deposit.
• Obligation to pay rent: Your landlord may require you to keep paying rent until they find a replacement tenant.
• Poor reputation: Terminating early may reflect poorly on your reputation, making it difficult to sign another commercial lease.
• Legal action: A landlord may pursue legal action against you for breach of contract.
• Operational disruption: The fees associated with breaking a commercial lease early may affect your business’s operations.
• Financial penalties: Tenants may have to pay unamortized lease-up costs, including expenses related to brokerage commissions, free rent concessions, and tenant improvements.

Can I Break The Lease Early Without Penalties?

You may be able to break the lease early without penalties if either of the following early termination clauses are present in your commercial lease:

• Co-tenancy clause: You may be able to terminate your commercial lease early if an anchor tenant departs.
• Bailout clause: A commercial landlord may include a bailout clause, letting a retail tenant break their lease if they have low sales and are struggling to make payments.

Here are some cases where you can terminate a commercial lease early and potentially not face penalties:

• You reassign the lease within legal restrictions.
• Your company has declared bankruptcy.
• The landlord breaches a lease provision that compromises the business’ productivity and safety.
• The landlord agrees to early termination because they’re in a high-demand area and can easily sign another lease with a different business tenant.

How to Write an Early Termination Letter for a Commercial Lease

Follow these steps to write an early termination letter for a commercial lease:

1. Date the letter and address the landlord, including their name and address.
2. Reference the commercial lease you’d like to terminate early.
3. List the lease termination date. Please note that this is your requested date, as the landlord isn’t required to comply.
4. State the reason for early termination, as it may compel the landlord to agree to your request.
5. Clarify whether you’re requesting the security deposit back.
6. Sign the letter and print your name.

Commercial Lease Early Termination Letter Sample

Here is an early commercial lease termination letter template in PDF and Word format: