Commercial Tenant Requesting Early Termination of Lease

I am a landlord residing in New York State.

I have a commercial tenant (physician private practice) who has been with me for more than 15 years.  He has sent me a certified letter requesting that we meet to discuss "mutually beneficial terms to an early termination." He wants out of the lease 18 months prior to its termination.

The lease was signed on April 1, 2006 and runs until March 31, 2011.

In his letter he states that he needs more space and in order to survive in ever changing economic and insurance times has to move. He states that he tried to reconfigure what space he had and also hired a consultant in chiropractic design, but was unable to come up with something satisfactory.

He also states that he wanted to move out in 2008, but since I had another space vacant he did not want to leave me with two empty and unrented spaces. The other space has since been rented.

What I know from reviewing the county records is that he went ahead and purchased a building in June 2007 for a new office. So, the idea of a new office has been known since 2007.  He also has listed in the current telephone directory that he would have been moving to his new location as of 2008.

The only clause in the current lease is one related to default in payment of rent and if the tenant deserts or abandons the premises, he/she is responsible for the rental term of the lease agreement.

I would like to know what my rights as a Landlord are. I understand that he has purchased a building for his own use and will be renting out other spaces within it. I realize that he wants to move into his own bulding, but i also am now gonig to be left without a tenant.

I also want to agree to something that will provide me with a tenant as soon as he leaves. Is he liablfe for the remaining rent for the term of lease if we cannot agree to something and he abandons the property?

 I feel as though I am in the driver's seat since there is a term lease in effect, but I undertand that I must settle this in a reasonable manner.

 

 

 

ckustas:

Is he liablfe for the remaining rent for the term of lease if we cannot agree to something and he abandons the property?

Probably not.

You lilely have a duty to mitigate which means that you must rent it out as soon as reasonably possibly and then you'd be entitled to the rent for that period plus the additional costs you incur to rerent.

Depending on your local building market that could be a short time or a long time.

ckustas:

I also want to agree to something that will provide me with a tenant as soon as he leaves.

That's probably not gonna happen. And I would strongly caution against getting the current tenant involved in seeking a replacement tenant. You end up with messy arguments if he finds one that you don't like and he figures he's met his part of the bargain and he's done.

Personally, if you were going to let him out of the lease, I'd go for just the money.

Pick any amount that satisfies you and put it on the table and see what happens.

It's up to you whether you want to negotiate or take a hard line.

Even though you think you are in the driver's seat, keep in mind that suing for breach of the lease is likely to cost you many, many thousands in lawyer fees and you would have to rerent before you could even sue for the unpaid months.

In some states the duty to mitigate falls only upon party in breech, Pa for example, --other places its joint duty--I do not know what counts in NY. You need to look it up

 

Be careful NOT to accept surrender unless you are positive it does not cut of his duty under lease to pay!

Practical answer is you both need to address mitigation.

What are your odds of finding a replacement tenant at same rents in your part of NY?

 

The lease spells out whatt the parties agreed! It may even have an acceleration clause? EG full balance becomes immediately due upon breech?

Reasonable is in eye of beholder--it may be 98% barter skills.

 

Me, I'd suggest he go find a sub

 

This is a continuation of my earlier post of a commerical tenant requesting early termination of his lease.  The chiropractor is moving into his own building and we have met with him to discuss a buyout agreement. We wanted to see what type of offer he was willing to make and we would then take that information and mull it over before meeting with him again. The remaining months on the lease are 19 months and he offered us 6 months. He also stated he would hope to leave by August 17th. We stated 6 months is not acceptable given the current economic market and the fact that we need a cushion to provide payment of expenses as we search for a new tenant. Again, we reiterated that he is under a contractual agreement for the entire rental amount as a result of breaking the lease.

We will be meeting again and have come up with an alternative proposal. My husband suggested that we would ask for 12 months upfront, opting him out of 7 months remaining on the lease.  Also, we would add a rider to the affect that if we did rent the space prior to the 12 month period we would return a portion of the monies, less the difference in the current amount of rent received (with the new tenant) versus what he would have been paying at the time.

He may counter with paying 6 months and then making payments each month after that based on whether the space was leased or not. I would state then he should just remain as a tenant, since he would be acting like one.

I suggested that we ask for 12 months first, without mentioning anything about the rider. If he balks then state that under the law, he could be sued for all of the rent remaining on the balance of the lease agreement. Of course, we would be paying out legal fees while the space remained empty as the doctor is in his new office conducting his practice and collecting payment.

Depending upon how the negotiations go, then bring up the alternative proposal about the 12 months buyout with a provision that if the space is rented earlier for a portion of the monies returned.

Comments and/or suggestions on this approach would be appreciated.

 

If he offered 6 mos cash--and you counter 12 mos cash--I'd consider next step as 9 mos cash--its clean.

To offset for new tenant could invite debates of how hard you tried etc.

Me, I'd say if he finds a SUB tenant to take over balance of his lease you'd not withhold approval of same and give him 95% credit for same as each payment cleared. Let him find  SUB tenant NOT substitute !

Hi Everyone;

I did finally negotiate an agreement with the tenant who wants to get out of his lease early.

A sample of the draft is posted below.  If there are any conditions/stipulations that I should have included, please let me know.

"Agreement of Early Termination of Lease"

It is hereby agreed upon between XXXXLandlord and XXXXTenant that upon the payment of one years advance rent(19 months left on lease, 7 months will be lost) in the sum of XXXXX$ that the above mentioned lease dated April 2006 will be terminated provided the tenant vacates by August 31, 2009. It is further agreed upon by the above parties that upon receipt of the above-mentioned sum no additional rent shall be due from the tenant, provided, however, that the landlord shall have one week to inspect the premises when the Tenant vacates. the Tenant shall pay for any damages to the premises,  w... is beyond the reasonable wear and tear.

Int he event that a claim is made or litigation commenced by a third party against the Landlord or the Tenant, and such claim or litigation relates to the subject lease, tenancy or premises, then the landlord and tenant shall continue to have liability to each other pursuant to the subject lease in relation to resolving such claims or litigation.

In consideration of the above payment, the Tenant shall be allowed to display "XXXXX has moved" type sign in the window through October 31, 2009.

Again, just let me know if I have missed any significant conditions.

Thank you to everyone - especially, Adjuster Jack and Drew.

Your deal is unclear as to when $ is due--were it I, I'd make it crystal clear  and I'd suggest a date certain on or before the vacate date.

 

And I'd probably want default language if not paid by date set--EG reverts to full balance due AND tenant pays my attorney's costs to collect.

I'm not sure how Dr executed lease--but if personal I'd want spouse to sign as well.  

And a date for damages to get paid or released?

 

Again--best to have your attorney review...

 

 

I agree with Drew's suggestions.

The only comment I have is about the second paragraph that discusses third party claims.

You'd still have recourse against each other even without that clause.

But what I think you are aiming for (if you still want it) is a hold harmless - indemnification clause.

If so, there are better ways to write it with standard wording that has already long been tested in the courts.

See what your attorney has in his word processor that can provide you with the boilerplate.

 

I apologize for emailing the board again, but there has been some challenges to the agreement drafted.

Here is what was the tenant responded to us after receiving our agreement modification:  Any help in making sure I am not going to lose out here would help!

  Tenant's response: After consulting with my attorney, He feels you line regarding potential suit would create greater legal issues for  both you and me.  In the unlikely event a suit arises that is what insurance for. I have insurance which has not been cancelled and I presume your mom has insurance also to cover her. Regardless of who would be sued, EVERYONE would be sued.   In addition the front window is plenty big enough for both a For Rent sign and a Have Moved sign. The six month or when actually occupied for a "Have Moved" Sign is reasonable, and will stay in the agreement.  My response: If we have to agree to this letter to get the money, what I was going to do is tear down the sign after the keys have been returned, the check given and cleared the bank. I will replace it with a small sign. He is just moving down the street and probably already informed his patients. Maybe he is doing this to undermine my renting my own building. The window will be displaying for the most part, the advertisement for rent, not for his move to his new location - I own the building and he is not going to tell me what I can or cannot place on my property as a former tenant.   Tenant's Response: I told your Mom over the weekend I would be cleaning up and fixing up the "Men's Room so that is a non issue also at this point.   My Response: He has paid for the month of August so he has until the end to clean up and return the keys. No where in the agreement he submitted - as shown below - does it give a specific date as to when the keys shall be turned in and the check given. It could be three weeks, or two months from now. - I will not sign an agreement without receiving the check and keys. More importantly, there should be a concrete date, correct?   Tenant's Response: You have a sweet deal in front of you. Most tenants would have walked out in the middle of the night and you would have to chase after them and sue them for a FRACTION of what I am willing to give you. The below is my final agreement, unless of course you would like to reduce my payment.  My Response: First, he decided to break the lease -  he signed a contractual agreement to occupy space and pay rent for five years. Do not make is sound like he is doing me a favor. He has agreed to pay for 12 months out of th 19 remining months. Granted that is good but the way the market is right now, it may take longer than that to re-rent it.  In the meantime, utilities must be paid, taxes must be paid insurance must be paid. The lease allows for the landlord to sue for the total amount due if the lease is broken, so who is he kidding? I am basically back to the agreement he sent me originally.      Agreement of Early Termination of Lease   It is hereby agreed upon between XXXXX herein referred to as the Landlord and XXXX residing at XXXXX hereinafter referred to as the Tenant  that upon the payment of XXXXX that the above mentioned lease dated April 2006 will be terminated and all business relations between the Landlord and Tenant will end. It is further agreed by the above parties that upon receipt of the above-mentioned sum no additional penaliies or liabiliites willl be incurred by the Tenant. Upon the payment of XXXXX it is agreed tha fully settles all business between the Landlord and Tenant and neither party has any further rights or obligations to the other. In consideration of the above payment, the tenant will be allowed to display a "XXXX has moved" type sign in the window for six months or unitl the unit is actually occupied by a new tenant, whichever comes first.  

 

He wrote it? It remains unclear as to exactly when the XXX payment is due--upon signing deal?

Hi Drew;

His attorney drew up the agreement and we then modified it just now to include that up the tenant's signing of the agreement and confirmation and assurance that the bathroom had been repaired, and that a check in the amount of XXXX dollars was presented along with the agreement, then I would accept the agreement and then sign it. A copy would go to the tenant.

As for his sign to be up for six months I do not care that it is in the agreement, once that check has cleared, I am posting my For Rent Sign - to take up the entire window.

I guess at this point, I am trying to get the money.

Would appreciate the comments

 

I'd be pretty clear that deal  w check needs to get done rather quickly.

 

I'd physically check bathroom and rest of premises before the deal completed....

 

I'd not play childish games as to his sign v your sign. No odds in it.