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Stuck in commercial lease with 2 years left - went fully remote, can I break it?

Started by rebecca_l_13 · Jun 7, 2024 · 3 replies
For informational purposes only. Not legal advice.
RL
rebecca_l_13 OP

I'm in a tough spot. Signed a 5-year commercial lease for office space in Denver back in 2023 (3200 sq ft, $6800/month). At the time we had 8 employees and were growing.

Fast forward to now - we're down to 5 employees, all working remotely, and we haven't used the office in over 6 months. Paying $81K/year for empty space is killing us. We still have 2 years left on the lease.

I talked to the landlord about early termination and he basically said "not my problem, you signed a contract." The lease has no early termination clause. What are my actual options here? Can I just stop paying and walk away? Find a sublease tenant? I'm desperate.

RL
rebecca_l_13 OP

Quick update: Sent the landlord an email proposing a $27K buyout (4 months rent) to terminate in 90 days. Also offered to maintain the space and help with showing it to new tenants.

He responded pretty quickly - rejected the buyout but said he's open to me finding a sublease tenant OR he'd consider a higher buyout number. Asked me to submit a formal proposal with financials showing my company's situation.

Progress at least. Going to simultaneously list the space and counter with a $35K buyout offer.

RL
rebecca_l_13 OP

Final update: We reached a deal! Found a subtenant through a commercial broker (tech company looking for short-term space). They're willing to take it for 18 months at $6,500/month.

Landlord agreed to let me assign the remaining 24 months to them, with me paying a $13,600 "assignment fee" (2 months rent) and guaranteeing the first 6 months of their rent. After 6 months I'm completely released.

Not perfect but way better than paying $163K over 2 years. Total cost to me is about $52K (6 months guarantee + assignment fee + broker fee) vs the full amount. I'll take it.

Thanks for all the advice, especially @terms_and_conditioned_11 and @PrivacyOfficer_2. The key was approaching it collaboratively and having multiple options (buyout vs sublease) to negotiate from.

CC
chad_cpa_31

For commercial lease disputes: check if there's a personal guarantee. If you signed one, your personal assets are at risk even if the business fails. This is one area where attorney review before signing is worth every penny.