We Shall Never Surrender….

Recently, we received a number of instructions to explore and negotiate an early surrender of various commercial leases.

There are many reasons a tenant is required to exit a lease, including:

1. They have outgrown a property or need to downsize
2. The property no longer meets its operational requirements (location, for example)
3. They have missed an important deadline - a tenant break clause, for example
4. They acquired the property to satisfy an urgent contract that has now been fulfilled
5. The Alienation clause is restrictive, preventing a simple assignment or sublet

Winston Churchill famously declared in his inspiring wartime speech in 1940 that ‘we shall never surrender’. This can be the response of many landlords who are potentially reluctant to take back a unit because of the uncertainty of reletting/disposing. As such, surrender negotiations can be complex regardless of whether the parties act for the landlord or tenant. They need to reflect:

1. Likely reletting prospects - what is the potential void period
2. Dilapidations liability - what are the costs to put the property back into repair
3. Any improvements needed before reletting - for example, the EPC rating may need to be enhanced
4. Length of lease currently unexpired
5. Other holding costs - business rates/loss of insurance/loss of service charge
6. Covenant strength and ability to meet future obligations.

Our unique consultancies, Raeburn Consulting and Dilapsolutions, can provide this ‘one-stop’ service to enable clear and concise advice to the client and a successful conclusion.

For more information or assistance with the early surrender of a commercial lease, please email neil@raeburnconsulting.com.