Our retail or office tenants frequently consult us, questioning their right to surrender their lease before the end of its term. They may want to do this due to the premises’ failing economic conditions or structural problems. If the prevailing market rate in the area has increased, landlords welcome a lease surrender even from a reliable paying tenant.

We highly recommend that commercial tenants engage the services of an NYC Real Estate Lawyer to facilitate the negotiation of a formal surrender agreement. Such an agreement serves to modify the lease terms, allowing for an earlier termination than initially stipulated.

Key considerations to be addressed in this negotiation process include establishing the move-out date, defining the condition of the premises upon surrender, and securing a comprehensive release of the tenant’s ongoing obligations under the lease. These terms are subject to negotiation, with the release often held in escrow for a specified period post-move-out to safeguard the landlord against potential late-discovered issues such as damage or outstanding utility bills.

Additionally, the agreement should outline the protocol for returning the security deposit and may include provisions for a joint walk-through by the tenant and landlord on the surrender date to prevent any misunderstandings.

Ensuring that the lease surrender agreement addresses the waiver of rent accruing after the surrender date and explicitly releases any personal guarantor from future obligations is of utmost importance. If the surrender aligns with the terms of a “good guy guaranty,” it must be explicitly referenced, with both parties acknowledging the tenant’s compliance with the guaranty requirements.

Our firm has considerable experience drafting surrender agreements for tenants seeking an early exit from their lease. We firmly believe that by providing the landlord with adequate notice and having legal representation prepare the proposed agreement, tenants can often circumvent landlord-tenant disputes and avoid being listed as litigious tenants in public databases.

To arrange a consultation with an NYC Real Estate Lawyer, please contact us at 212-619-1500.