What happens when you break a commercial lease?

UPDATED: Oct 1, 2022

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What happens when you break a commercial lease?

Hi there,

I have a lease for 3 years for a retail space and unfortunately my business is not doing well and may need to close down. I don’t have a section in my lease which talks anything about what happens when I break the lease or any section about what happens in case of a lease default. I need to figure out what I can do and if it is possible to break the lease in this case.

Asked on June 11, 2018 under Real Estate Law, California


SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 4 years ago | Contributor

If you break the lease, you are still liable for the rent due under the lease until the earliest of:
1) The landlord re-rents the space using reasonable efforts;
2) If the landlord doesn't try to re-rent, until a court (if he sues for you for the money) decides that IF he had tried to re-rent it, he would have been successful (e.g. he doesn't try to re-rent but just sues you for the money; a court decides that if he'd tried to re-rent it, he could have in 6 months--he can get 6 months rent from you); or 
3) The lease expires.
The lease is a contract: you are liable for what you agreed to pay. So say there are 18 months left on your commecial leasse. You could be liable for up to 18 months more of rent, or until he re-rents it or *should* have re-rented it, if he made efforts to do so. If he tries to re-rent and does so in 8 months, you'd have to pay 8 months of rent, for example. 
That your business is not doing well has no bearing on the obligations under the lease.
If you signed the lease in your own name or capacity, *you* are liable under it, as you would also be if you had to give a personal guaranty. If your business was an LLC or corporation and the LLC or corporation, not you, was the tenant (you did sign personally, but on behalf of the company, as its president, managing member, etc.) and you did not personally guaranty the lease, only the company would be liable.

IMPORTANT NOTICE: The Answer(s) provided above are for general information only. The attorney providing the answer was not serving as the attorney for the person submitting the question or in any attorney-client relationship with such person. Laws may vary from state to state, and sometimes change. Tiny variations in the facts, or a fact not set forth in a question, often can change a legal outcome or an attorney's conclusion. Although AttorneyPages.com has verified the attorney was admitted to practice law in at least one jurisdiction, he or she may not be authorized to practice law in the jurisdiction referred to in the question, nor is he or she necessarily experienced in the area of the law involved. Unlike the information in the Answer(s) above, upon which you should NOT rely, for personal advice you can rely upon we suggest you retain an attorney to represent you.

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