Terminating a Commercial Lease Early – What Every Tenant Should Know 

 Posted on November 19, 2024 in Commercial Lease Agreements

If your business needs have changed, you may find yourself contemplating having to terminate your commercial lease early. For example, your business might be undergoing financial difficulties, you might be rethinking your brick-and-mortar strategy, or your company might be growing and need more space. Whatever the reason, in such a case an experienced real estate attorney can advise you on your rights and obligations when terminating your commercial lease prior to the end of the contractual term. 

What Happens if You Terminate Your Lease Early?

To legally terminate a commercial lease early, Illinois law requires you to notify the landlord. The consequences of breaking your commercial lease early will depend on several factors, including Illinois law and the specific terms of your lease agreement. Depending on the facts of your case, you may face the following:

• Having to find a replacement tenant

• Termination fees

• Legal costs

• Termination penalties

Lease Agreement and Early Termination

Your commercial lease will probably contain one or more of the following provisions laying out what each party’s rights and responsibilities are in the event of early termination, as well as the circumstances under which you may be able to terminate the lease early:

• Early termination clause: Typically, this clause will list any penalty fees for early termination.

• Bailout clause: Also called an early termination clause, if you negotiated this clause into your contract it may offer you some leeway to terminate early. It lays out situations where you can terminate the lease early based on your business’s financial performance.

• Lease buyout: If you signed a commercial lease with a lease buyout provision, you may be authorized to leave the lease early by paying a penalty fee.

• Co-tenancy clause: This clause gives you the right to terminate a commercial lease in a business complex early if an "anchor" tenant leaves or occupancy drops below a certain level.

Other Options to Terminate Early

Assignment

You may be able to assign your lease to another tenant, either because you are contractually allowed to do so, or by negotiating with the landlord. Through an assignment, you will transfer the lease obligations to another tenant.

Sublet

Instead of terminating an agreement, you may be able to sublet the remainder of your lease, but this may require landlord approval.

Mutual Termination 

If both parties wish to terminate the agreement, you and the landlord may enter into a lease termination agreement.  

Contact a DuPage County, IL Commercial Landlord-Tenant Attorney

If you are a tenant considering whether to terminate your commercial lease ahead of time, the experienced attorneys at Lindell & Tessitore, P.C. understand your legal options and can advise you on the best course of action. We can also help you draft or negotiate your commercial lease agreement so that it protects you from any eventuality, including early termination. Our skilled Naperville, IL real estate lawyers understand this complex area of Illinois law. Call our offices at 630-778-3818 today.