Breaking an office or warehouse lease

Long term leases, may have provisions in them for a tenant to leave early. Maybe your landlord is looking to relocate you as a tenant in essence breaking an office lease in place , or maybe you as  the tenant is looking to move into a new space that is more suitable?

There are  times in Austin commercial real estate when the usefulness of the lease has run its course before the term has ended. As a tenant, there are some actions that can be taken to protect yourself before executing a  lease so that during the lease term you will maintain some flexibility.

Before you execute an office lease

We always suggest that you have an attorney review your office or warehouse lease

Here is what is important , make sure you hire a commercial real estate attorney that is familiar with Texas based lease contracts, you will want to ask an attorney for review if your office lease seems complex or the language in it is hard to comprehend. There can be large office leases or relatively short leases that have easy or tough language within the lease.  Potential  problems can be avoided with some by having your attorney translate and offer modifications regarding the details of your office or warehouse lease. Simple straight forward leases tend not to need the oversight, but it is always the tenant’s decision as to engage with an attorney or not.

Buyout or termination provisions in breaking an office lease

During the negotiation process, if  a tenant feels they are going to expand or need to move , your Broker can help you find a way to work  in  buyout or an out clause into the lease. When negotiating a lease is making sure there is a termination option if it applies, let’s be straight forward on this , they are not easy to attain unless there is a legitimate reason to have this.  Tenants with office or warehouse leases longer than five years may want this clause in their lease. A right to terminate will not be offered voluntarily by your landlord, rather, it is something your broker will need to establish before singing.

During your office lease

Record all the issues you have had

Keep records in an organized manner regarding issues with the space you have been leasing and how long management (landlord) took to repair or fix the issue. Perhaps this can be used as leverage if you need it,  however don’t bank on this being the pivot point to allow breaking an office or warehouse lease.

Sublease as an option?

A tenant should be able to sublet their space , this typically happens when the space is no longer suitable due to downsizing requirements or up-sizing requirements. They key is your broker will help you review your sublease language, be careful some leases have heavy fees involved in them and the landlord will get paid extra if you elect to sublease your space to another tenant called the sub-lessee.

Other Options to breaking an office or warehouse lease?

Ask your broker to have a conversation with the landlord

Your broker may have a greater understanding of how leverage your termination.

Rent reduction towards the end of your term?

This option has teeth in a tough market, with good markets it is not a high probability option unless you as a tenant have been very good about paying your rent on time for most of the term of your lease.  Of course this is a win-lose option in a good market because it does not benefit the landlord and the tenant, only the tenant benefits in this situation.l