Consequences for Breaking Your Commercial Lease

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  2. Consequences for Breaking Your Commercial Lease
Consequences for Breaking Your Commercial Lease
Real Estate

Like all lease agreements, commercial leases are legally valid and binding contracts between the landlord and the tenant. As a result, the party that breaches a commercial lease is subject to certain penalties. If a landlord or tenant acts or fails to act in a way that breaches one or more lease terms, the breaching party could be subject to significant legal liability and financial losses. An Arizona real estate lawyer can advise you of your rights and responsibilities under a commercial lease and the potential consequences in the event of a breach.

Consequences for a Tenant Who Breaks a Commercial Lease

The exact consequences you may face for breaking a commercial lease depend entirely on the terms of your lease. However, many leases contain common provisions outlining repercussions for tenants who break commercial leases by moving out before the end of the lease, failing to pay rent as it becomes due, or committing other material breaches of the lease.

For instance, many leases provide that tenants who breach a lease are responsible for the back rent owed up through the date that the lease is terminated and for the remaining rent left on the original lease term. In other words, the landlord can accelerate and charge the tenant for all future rent due under the entire term of the lease. The tenant may also have to pay back any rent abatements they received at the beginning of the lease term. Finally, most leases provide that the tenant is responsible for the collection costs in case of a breach, including attorney’s fees and court costs.

Consequences for a Landlord Who Breaks a Commercial Lease

Alternatively, if a landlord wrongfully terminates a lease, they, too, risk adverse financial and legal consequences. For example, if the landlord evicts the tenant without cause, the landlord could face wrongful eviction action. If the landlord wrongfully seized and/or sold the tenant’s personal property for rent under A.R.S. §33-362, then the landlord also could face a claim for the missing personal property. Even if the landlord lawfully evicts the tenant, but he does something illegal in the eviction process, the tenant may have a legal cause of action against the landlord, in additional court costs and attorney’s fees, depending on the terms of the lease.

Alternatives to Breaking a Lease

A breach of a commercial lease need not always occur if the parties can work together to resolve the issue proactively. For example, suppose a business has outgrown its space and needs to move to a larger location. In that case, the business may be able to negotiate with the landlord to end the lease early. For instance, the parties may agree to delay the termination of the lease until the landlord finds a new tenant.

Furthermore, the commercial lease may provide for a “break” or early termination clause. In that case, the tenant may get out of the lease early by paying a fee and without owing additional rent for the remainder of the lease term.

Likewise, a tenant may be able to negotiate the payment of a smaller penalty for premature termination of the lease than called for in the lease. For example, the tenant may agree to pay rent for an additional few months after vacating the space, make the space available for showing to prospective tenants as needed, and thoroughly clean and empty the space upon moving out.

We Are Here to Help You with Your Legal Needs

We aim to help you understand the consequences of breaking a commercial lease and the legal and financial liability you might face during a breach. With our assistance, you will know what to expect if a breach occurs and how to take action. Contact the offices of Provident Law today at (480) 388-3343 or online and schedule an appointment to speak with our Arizona real estate attorneys about your legal matter.

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