Terminating a lease early


A question making the rounds is what are the options to tenants, and to landlords, to end a lease early? 

Many will be looking at using the Force Majeure option to cancel a lease, however this is not the intended use of this clause, and most do not allow for a cancellation without other considerations.  While the Force Majeure clause could mean that a tenant may be able to suspend rental payments (if you haven't read it yet, please read our previous article on Force Majeure), it does not mean that the lease itself becomes null and void. 


Given the national state of emergency, there would be no grounds for early termination.  Should a tenant renege on their duties in respect of their lease they would be open to legal action due to breach.


Similarly landlords will not be entitled to simply evict a tenant at this time, or enanct early lease termination, and given the President's request for landlords and tenants to honour their agreements, this would be against the spirit of the time.


However, what should you do if you are unlucky enough to be in a  situation where due to the current circumstances, you lack cash flow, and your business may have to close?  Are there options to look at before considering closing shop?


Yes, there may be a few.


First, there are several options to assist with cash flow.  Make use of the Government supplied options for financial relief.  While it may seem daunting to apply for these relief funds, the benefit is unmistakable.


Second, interact with your landlord, and see if there are any ways in which they can assist with rental holidays, or deferred rental, or even a financial assistance option that some larger landlords may be able to give.


Third, look into subleasing.  This is a potential way to temporarily reduce your monthly overheads while you get back to business.  (More on this in our next Insight article) 


If you really have no other option but to close your doors, don’t feel diminished.  These are tough times.  


If you have to end your lease early, and wonder what to do, read your lease cancellation clause and speak to your landlord.  In most cases the landlord will not be obligated to release tenants from a lease, and if they do they will be within their rights to claim damages.  Given the COVID-19 crisis, some landlords may be more open to allowing tenants, who really have no other option, to terminate the lease without penalties.


Our advice is to discuss the problem openly with your landlords, or have a property professional assist.  


In conclusion, Its best to discuss your options with your landlord and try to come to an agreement that will allow both parties the best possible outcome.


For any assistance, please contact ANVIL Property Smith