Do you have office space in NYC? Maybe you no longer need it. You want to turn to your landlord and just say:
“I’m outta here. It’s not going to work out between us.”
But Neil Sedaka was right and “Breaking up is hard to do.”
Ending a lease early can present a whole host of challenges like:
- Eating your rent when you’re not even physically there (like a lot of folks right now)
- Paying a premium on cancellation
- Losing your security deposit
- And, perhaps even sometimes legal action.
But sometimes, you just need to do what is best for you. So let’s talk about your options.
Here are the four things you can do to end your lease or at least reduce your financial obligation if you have office space in Manhattan:
Say your landlord hasn’t legally been upholding their end of your contract. It’s possible you have a termination clause in your contract that allows you to end the lease should your landlord fail on their end of the deal. Or even better you may have negotiated a termination right after a certain period of time with the only stipulation being you have to pay the unamortized portion of the deal costs- things like the free rent and construction dollars the landlord spent on your space.
But even if you don’t have such a right, do not despair, you can still try and negotiate out of the lease. And it’s important to know that your real estate advisor (what I do) can negotiate on your behalf for a success fee rather than an attorney that will most likely charge you an hourly rate or a flat fee (regardless of result) and most likely has no relationship with the landlord, unlike people in my role.
Gather the paperwork, get some research done on your outstanding financial obligation (know your numbers), and bring it all to the table. Negotiation is key and keeping an open mind on a resolution can do wonders for you.
Subleasing is the idea that your name is still on the contract with your landlord, but you turn around and lease (sublease) your space out to a new tenant. Many leasing agreements have a right to sublease clause in them (a crucial point that was hopefully negotiated initially), but even if you don’t, that doesn’t mean it’s not an option. Talk to your landlord and see if they’ll take a new tenant. In all likelihood, you’ll be subleasing your space for less than you pay, meaning you’ll have to pay off the difference. But if you need to get out of your space for whatever reason, this can often be the most economical route to take. For more on How To Sublease, watch this video here.
It’s like a sublease but the tenant coming into the space can directly communicate with the landlord. This is unlike a sublease where the subtenant can only communicate with the sublessor and has no direct relationship with the landlord. And just like with subleases you need to have the landlord’s approval to allow the transaction to occur. Why wouldn’t every landlord approve this? Comes down to the credit quality of the tenant. If it is not a stronger tenant, the landlord won’t want to take the risk of collecting rent directly and would prefer the onus be on the existing tenant.
4. Buy out:
This is basically exactly what it sounds like. Instead of having to pay your rent, you can try and negotiate with your landlord to buy out the remainder of your contract. Typically, the number will be lower than paying rent (otherwise you’d never do it), so you may be wondering what’s in it for your landlord? Well, if the space is in demand and your landlord can fill it pretty quickly, they may only go a few months without rent and it would be covered by your buyout agreement. Then, he’ll turn around and rent it out to a new tenant for whatever you would have paid before, pocketing a decent difference. If this works for both parties, it can be an excellent solution.
There, not too bad was it? You’re not trapped in this relationship. There’s often some room for negotiation, and these 4 solutions can help you get back on track to something better.
As always, please feel free to contact me at firstname.lastname@example.org or 917-684-1764 if you have any questions or you’d like to discuss your office lease.