DCA Q&A – HOW SHOULD I APPROACH THE LEASE?

Q: I’m seriously considering shutting down my business. It’s bumping along with modest profit, but I don’t see the market really improving and I don’t enjoy the work anymore. I’m also quite confident that I’ll get some decent job offers if and when I leave.

The company itself doesn’t really have any debts – the only snag is the lease I signed. It’s a 16-year lease with just over eight years left. Will I have to pay up the remaining rent, or how will this work? I wouldn’t be in a position to pay eight years rent up-front!

 

A: The amount you will have to pay to get out of the lease depends on two things – the nature of the lease itself, and your landlord.

Firstly, if the lease itself has a break clause or provision for early termination, that gives you a clear roadmap of how to proceed. Go through your copy of the lease document and, if you don’t understand it, get some legal advice from the person who advised you initially. Ideally, there’ll be provision for an early exit that will limit your liability.

 

If there isn’t, and you personally signed the lease, that leaves you liable to pay the rent for the remaining eight years – unless your landlord agrees otherwise. If there’s no provision for an early exit, or the terms of exiting the lease are a bit too onerous, then speak to the landlord. He or she may agree to accept a reduced payment of, say, a year’s rent if you were to hand the keys back in the morning. However, a landlord is well within his or her rights to refuse this, and to insist that you stick to the terms of the lease.

 

If the landlord is agreeable, you could be able to sub-let it. However, you’ll still be liable to pay the rent to the landlord – this may mean making up a shortfall in the rent regularly, or even paying it all if there’s no tenant in place.

 

There is, however, an alternative to just shutting up shop, particularly if you’re profitable in such a poor business environment: selling the business. At the moment, we’re publishing a series of articles on exiting your business, ideally with a decent bit of money to show for your efforts. Finding someone to take on both the assets and liabilities of your company (including the lease) is tricky. However you can find some help on assessing your business’ attractiveness to a buyerhere and finding a suitable buyer here.