Our retail or office tenants frequently consult us questioning their rights 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 recommend that a commercial tenant retain an NYC Real Estate Lawyer to negotiate a formal surrender agreement. A lease surrender agreement amends the lease so that the term can end earlier than the initially agreed expiration date.
Some critical issues to be addressed are the move-out date, the condition of the premises at the time of surrender, and a general release of the tenant’s further obligations under the lease. These 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, outstanding utility bills, etc.
The agreement should also indicate whether and when the security deposit will be returned. A walk-through by the tenant and landlord on the date of surrender can often avoid misunderstandings.
The lease surrender agreement must address the landlord waiving rent due after the surrender date. It must explicitly release any personal guarantor on the lease of future obligations. If the surrender is being made according to the terms of a “good guy guaranty,” the lease surrender must reference that. The parties must acknowledge the tenant’s compliance with all the guaranty requirements.
Contact us if you need an Early Exit from your Lease
We have drafted many surrender agreements and believe that if the tenant gives the landlord adequate notice and has their lawyer prepare 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