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As Texas has begun to reopen, Palmer Lehman Sandberg has adjusted accordingly.

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Can a tenant break a lease?

| Apr 17, 2019 | Uncategorized |

A commercial shopping center has the potential to produce a high return on investment with a blend between stable anchor tenants and lucrative outparcel or subdivided tenants for a landlord. A key factor to being able to attract and retain quality tenants is the type of lease, terms of the rent or Common Area Maintence (CAM) fee, and any personal or corporate guaranty on the lease. Therefore, it is vital to establish both a strong understanding of your goals and a relationship with your attorney who will draft and negotiate these terms on your behalf.

The three main types of commercial leases include: form of net lease, where the tenant pays a percentage of usage of common costs such as parking lot maintenance, share of utilities or property taxes, gross lease, where the tenant pays a fixed amount each month which provides all services from landlord, and finally, a percentage lease which may incorporate features of the above leases along with a percentage of gross sales payable to landlord.

Once a lease is executed, there is the possibility that a tenant either is not happy with the space or the business may not be doing well. On some occasions, you have to deal with a tenant requesting to get out of the lease early. In Texas, there are a variety of outcomes when a tenant seeks to terminate a lease without the landlord’s approval.

Why does the tenant want to leave?

When a tenant wants to leave a space, especially one that is in a highly trafficked area, there may be other factors influencing this decision. Perhaps there is a business dispute among partners, perhaps personal issues (a divorce can wreak havoc on a business owner’s life) or financial reasons for the tenant’s request. No matter what the reason, however, you as the landlord have to decide if you will allow the tenant out of the contract and for what penalty.

Is a lease agreement binding?

A lease agreement is a legally binding contract with multiple obligations by both the tenant and the landlord. In fact, if the tenant and landlord disagree on how or whether to terminate the agreement, it will likely end up enforceable in court. If one or the other does not perform the duties described in the contract, the ultimate remedy is hire an attorney and spend additional funds clarifying who is liable.

Can a tenant break it without your permission?

The simple answer to this is yes, a tenant may choose to leave a space without a landlord’s permission. The tenant must understand and accept that you the landlord have the legal right to go to court. In court, you may even wind up with a legal judgment of money damages including:

  • Rent through the end of the lease term
  • Lease break fee
  • Restoration of the premises per the conditions of the lease
  • Award of reasonable attorney fees, court costs, interest

As a landlord, the benefits of having a clear and strong lease will discourage tenants from even attempting to terminate early. Sometimes, however, situations arise that warrant those tenants wanting to leave a lease agreement early and the matter will end in litigation. It is to your benefit to have a strong lease in either scenario. Contact us today for a checklist of landlord questions that you should decide prior to negotiating any commercial lease.

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