Q&A - If I sign a 5-year lease for my new business venture, can I get out of it?

Q:    During COVID lockdown I could not work as a mobile beauty therapist. As I did not qualify for government funding, I started making cakes and selling them through my Facebook page. Things went well and I expanded into take-away pastries, light meals, and a local delivery service. Now I want to get premises and open a shop. I have found a former café complete with equipment, but it means taking on a five-year lease. Could I get out of the lease if things don’t work out?

A:    Commercial leases are often five or ten years. However, some commercial leases contain a ‘break clause’ which provides the right to terminate the agreement early, allowing either the landlord or the tenant, or both, to end the lease early if certain conditions are met.

Break clauses are most likely to be exercisable on a particular date, although they can also be exercisable on a rolling basis, giving either party an option to get out of the lease at any time, provided that the party requiring to break the lease gives six months’ minimum notice. Without a break clause, the only other option of getting out of a lease would be if it can be assigned, or transferred, to someone else. But this could only be done with the landlord’s agreement and upon complying with any Landlords requirements set out in the Lease.

Landlords will usually only agree to lease assignment if the new tenant can prove they can pay the rent. Often, they require a signed agreement from the existing tenant to guarantee payment if the new tenant fails to pay. This is called an Authorised Guarantee Agreement (AGA).

Before taking an assignment of an existing Lease, signing a brand-new lease, a tenancy or other agreement you should ask an experienced commercial lawyer to check it over to ensure that the Lease is suitable for your particular business needs.

Article 26/07/2021

This question has been answered by Sêra Henderson-Jones, a Chartered Legal Executive with GHP Legal.  If you would like to speak to someone about this or any other legal matter it is still possible, and we are doing everything we can to ensure that we continue to offer our high levels of service to our clients.  In accordance with government guidelines, some of our lawyers are currently working remotely which means you may not now receive a response as promptly as you may expect. Please kindly bear with us and we will respond as soon as we are able.

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Sera Jones

Sêra Henderson-Jones

Chartered Legal Executive

Part of our Property team in Oswestry.