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Breaking a lease means one party, either the tenant or the landlord, fails to fulfill the stated terms of the contract. Some individuals may perceive this as a solution when problems regarding properties arise; however, the truth is that this act can only lead to more problems than solutions. A commercial lease is a legal agreement between a landlord and a tenant that generally outlines a relationship between two parties and specifically how certain property will be used in exchange for a monetary payment. It covers various details about the contract, including specific terms such as the effective date and the expiration date. Consequences of Non-Payment The landlord can sue the tenant for not fulfilling the terms stated in the commercial lease and demand payment for damages, which would be the total remaining months stated in the contract terms. As an example, if the terms for an office lease are set to extend four years, and the tenant only completed two years of the agreement, then that party would be obligated for the remaining balance of years on the contract if the landlord takes the case to court. Should the landlord be able to re-lease the property during that period of time, the tenant would be responsible for the months of vacancy prior to the signing of a contract with the new renter. It would be any time during which the property remained vacant until the effective date of the agreement signed by a new party. An owner can also break the contract due to other violations by the tenant that are listed in the agreement as the landlord reserves the right to terminate the agreement. How to Reduce Liability When Lease is Broken A commercial lease serves its purpose, primarily as a means to protect the interests of both parties. It is highly unlikely to break a contract without some type of liability being incurred. There are, however, pre-emptive measures that can be done to reduce liability when a commercial lease is broken. Liability Cap – Before entering into a commercial agreement, a tenant and a landlord can negotiate a cap on the liability exposure in case the contract is terminated prior to its expiration. If a cap is set, the party who broke the lease would only pay the stated amount of damages as opposed to any other means of compensation to the landlord. Break Clause – A break clause may also be included in a commercial lease which gives both the landlord and the tenant the right to terminate the agreement prior to the stated expiration date. In most cases, the break clause is only effective for a certain period of time. After the expiration of that time, the break clause is no longer in effect. Assignment Clause – An assignment clause gives a tenant the right to re-assign the agreement to another party within the terms of the contract. From that point of reassignment, the original tenant would no longer have any liability since the subsequent renter had assumed the liability of the agreement and the landlord did not incur any damages due to this approved reassignment. Breaking a commercial lease can be damaging and realistically should be avoided. In the case of unavoidable circumstances, the wise choice is to attempt to negotiate with the owner of the property some means by which the contract could be voided with little or no damage. Otherwise, the only choice is to seek the services of a realtor and/or an attorney to help negotiate with the other party to void the agreement. C. Michael Hunter is an expert in commercial real estate and office space information. To find out more about Dallas Office Lease, go to the main website at: http://www.lcrgusa.com/.
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