Legal Advice During Challenging Times

Can commercial tenants find new occupants to assume a lease?

On Behalf of | Dec 26, 2023 | Real Estate Law |

Commercial leases represent a significant liability for a company and the people who run or own a business that rents any particular space. The average commercial lease lasts anywhere from three to five years and imposes massive financial obligations on the business.

If a company fails before its lease ends, the landlord might demand that the tenants continue paying the lease until it technically ends. They could also refuse to release the tenant from the lease if they need a bigger or smaller space as the business develops.

Can a tenant arrange to have a different business assume their lease if they need to leave before the terms of the lease are complete?

The contract determines someone’s options

Commercial lease assignment is a controversial topic. Some landlords are open to it, while others prefer to avoid it whenever possible. Some leases specifically include language that prohibits tenants from assigning the lease to others. They would not be able to arrange to have another business assume the remainder of their lease regardless of the reason.

However, barring a clause prohibiting lease assignment, it may be feasible for someone to find a new business or aspiring entrepreneur to take over a commercial space that their company can no longer utilize. Even if the lease includes a rule against lease assignment, having another party take over the lease could still be an option during a business bankruptcy.

Both tenants and landlords can benefit from a successful lease assignment as it can diminish liability for an organization while eliminating lost rent for the landlord. Learning more about different solutions for commercial lease conflicts may benefit both tenants and landlords facing a dispute or a non-contentious concern about a property.