Q&A - If I sign a five year lease can I get out of it if the business does not work?

15/09/2014

Q: I have always wanted my own business and after being made redundant earlier this year I decided I would look for premises that would be suitable for a café as I have always loved cooking. Having searched for several months I could hardly believe my luck when I found an existing café business for sale. The problem is that the lease on the premises is for five years and as this is a completely new venture that makes me nervous. Can I get out of the lease if I decide I can’t make it pay after all?

A: When you sign a lease it is effectively the same as signing post-dated cheques for the rent up front, for every month right through to the end of the lease. Therefore, unless the Landlord will agree that the lease gives you the right to terminate the agreement early – this is usually called a “break clause” - you will be liable to pay the rent for the whole of the contractual term.

Your only other option of getting out of the lease would be if it was possible to assign the lease to someone else. Assigning it means you would be transferring it to someone else, but you could only do this with the landlord’s agreement. Generally speaking, the landlord will only agree to a lease being assigned if the new tenant can be shown to be able to pay the rent. The landlord will invariably require that you also sign an agreement saying that you will pay the rent if they fail to do so. This is called an authorised guarantee agreement – often referred to as an AGA.

Before signing any tenancy or other agreement you should ask an experienced commercial lawyer to check it over.

Iain Hall

Iain Hall

Senior Solicitor

Part of our Property team in Wrexham

Hannah Fynn

Hannah Fynn

Solicitor

Part of our Commercial and Residential Property team in Oswestry