Quite often, we are consulted by retail or office tenants questioning their rights to surrender their lease before the end of its term. They may want to do this due to failing economic conditions or structural problems at the premises. If the prevailing market rate in the area has increased, landlords frequently welcome a lease surrender even from a reliable paying tenant.
We recommend that a commercial tenant retain an NYC Real Estate Lawyer to negotiate a formal lease surrender agreement. A lease surrender agreement amends the lease agreement so that the lease term can end at an earlier date than originally agreed to by the parties.
Some of the important issues to be addressed are the move-out date, condition of the premises at the time of surrender, and a general release of tenant’s further obligations under the lease are all terms to be negotiated. The release is sometimes held in escrow for a few weeks after move-out to protect the landlord from any late discovered damage or outstanding utility bills, etc.
The lease surrender agreement should also indicate whether the security deposit will be returned and when. A walk-through by the tenant and landlord together on the date of surrender can frequently avoid any misunderstandings.
Not only does the lease surrender agreement have to address that the landlord is waiving rent due after the surrender date but must explicitly release any personal guarantor on the lease of future obligations. If the surrender is being made pursuant to the terms of a “good guy guaranty“, the lease surrender must reference that and have the parties acknowledge tenant’s compliance with all the requirements of the guaranty.
We have drafted many surrender agreements, and believe that if the tenant gives the landlord adequate notice and has their own lawyer draft the proposed lease surrender agreement, they can frequently avoid winding up in landlord tenant court and having their name listed in a public database of “litigious tenants”.
To schedule a consultation with an NYC Real Estate Lawyer, call 212 619-1500