Standing in the face of needing to “break a lease” can be a daunting and complex situation for both tenants and landlords.

However, in the face of such challenges, it’s important to remember that there are viable options available to both tenants and landlords.

In this blog post, we will explore a more cost-effective and efficient approach to handling tenants who want to exit their leases, emphasising the importance of collaboration, exploring options, and seeking professional guidance.

Landlords – what you should know 

When faced with the possibility of a tenant wanting to terminate their lease prematurely, it’s important for landlords to adopt a strategic mindset.

As we’ve mentioned before, hitting the red button isn’t always (or ever) the best solution. While it might seem like getting the tenants out of the property and sourcing new, more stable tenants is the best way to manage the situation, it’s likely to be a costly and stressful and legal journey.

Rather than viewing it solely as a setback, this presents an opportunity for collaboration and proactive decision-making. By working closely with tenants, understanding their circumstances, and laying out available options, landlords can unlock potential solutions that benefit both parties in the long run.

Of course, this process becomes significantly more streamlined if done through a property manager.

How it works for tenants

When facing the need to “break a lease”, tenants often encounter concerns about financial implications and logistical challenges. Fortunately, there are several avenues to explore:

• Sell your business: This is the best way to satisfy everyone. If you (the tenant) sell your business and the new business owner agrees to continue operating in the property, you get an out, and the landlord gets to continue receiving rent revenue. And if selling your business seems like an even more daunting task, it doesn’t have to be. While it is a big to-do, accessing your property manager’s network of potential buyers or business brokers means you don’t need to go through it alone. With the sale of a business, the lease associated with the property gets assigned from the current business owner to the new business owner.
• Reassigning a lease: Reassigning a commercial property lease involves transferring the lease agreement from the original tenant (the assignor) to a new tenant (the assignee). The assignor relinquishes their rights and responsibilities under the lease, while the assignee assumes these obligations and steps into the assignor’s position as the tenant. It’s important to note that this process involved legal considerations, documentation, and landlord consent, which means it can take a few months to iron everything out.
• Subletting a lease: Subletting a commercial property can mean leasing out all or a portion of a leased space to a new tenant. In this arrangement, the sublessor becomes the primary tenant and assumes responsibility for the lease with the landlord, while the subtenant occupies and utilises the subleased space. This doesn’t need to be a permanent arrangement, especially if you just need a subtenant in to build up cash flow for a short period of time. Landlords involvement is still required, as they will need to sign off as to whom or what the subtenants business use is.

How Azure can help

At Azure Property Management, we take pride in providing comprehensive support to landlords and tenants throughout the subletting and assigning process.

In a recent case, one of the properties we managed had a tenant seeking to terminate their lease early. Recognising their concerns and seeing that they were unaware of available options, we utilised our network of potential business buyers and industry experts to guide them through the process of selling their business.

Navigating lease challenges requires a strategic and collaborative approach. By fostering open communication, exploring available options, and seeking professional guidance, both landlords and tenants can navigate these situations effectively.

At Azure Property Management, we are dedicated to empowering landlords and tenants to make informed decisions and ensure successful outcomes.

If you need to with reassignments or subletting, reach out to our team for their expert support.