How to get out of a commercial lease early: break, surrender, assignment or subletting

What are your options?

This guide covers business leases in England and Wales. Start by reading your lease for these clauses:

Can you use a break clause?

If the lease has a tenant’s break, it is the cleanest exit. The lease sets the dates, the notice and any conditions (RICS Code, Part 3 para 2.3): miss the deadline or fail a condition and the break doesn’t work, so the lease carries on. Under Marks and Spencer v BNP Paribas [2015] UKSC 72, rent paid in advance for the period after the break date isn’t refunded unless the lease says so. See our guide to break clauses.

If your fixed term is about to end and the lease has security of tenure under the Landlord and Tenant Act 1954, section 27 lets you end it by fully moving out before the term date, so you aren’t in occupation when it ends (section 27(1A)), or by written notice at least three months before it (section 27(1)). If the term has already ended and the tenancy is continuing under the Act, you can end it on at least three months’ written notice (section 27(2)).

Will the landlord accept a surrender?

A surrender is an agreement that the lease ends early (1954 Act, section 38A deals with agreements to surrender), so it needs the landlord’s agreement. What the landlord wants in return, such as a payment (a “premium”), the rent to a set date, or the dilapidations settled, is a matter for negotiation.

Agree the terms in writing and have the surrender properly documented, including what happens to arrears and dilapidations. Handing back the keys without a clear agreement can leave you arguing about whether the lease ended at all: a tenancy can end by surrender (1954 Act, section 24(2)), which needs the landlord to agree. For a lease protected by the 1954 Act, an agreement now to surrender at a future date only works if the statutory notice procedure under section 38A was followed.

Can you assign the lease?

Assignment transfers the whole lease to a new tenant, who takes over the rent and obligations. The RICS Code says leases should allow it with the landlord’s consent, not to be unreasonably withheld or delayed (1927 Act, section 19(1)(a)). Where consent can’t be unreasonably withheld, the Landlord and Tenant Act 1988 says the landlord must give a written decision within a reasonable time, with reasons if it refuses or conditions if it consents, and the burden is on the landlord to show it acted reasonably.

On a lease granted since 1 January 1996, you are released when you lawfully assign the whole lease, but the landlord can require you to guarantee the incoming tenant under an authorised guarantee agreement (AGA). The RICS Code accepts that landlords may list circumstances for consent in advance, such as an AGA or no unpaid rent. See our guide to personal guarantees and AGAs.

Should you sublet instead?

Subletting creates a new lease beneath yours. You collect rent from the subtenant and keep paying your landlord, so you stay liable if the subtenant defaults (the release in section 5 of the 1995 Act applies on assignment). The RICS Code says subletting should be with the landlord’s consent, at rents not less than market rent and on terms consistent with your lease, and that subleases may be excluded from statutory renewal rights; it says leases should allow subletting of the whole and may allow parts.

The routes cost different amounts. On a lease granted since 1 January 1996, assigning the whole lease releases you (section 5 of the 1995 Act), though you may have to give an AGA; subletting leaves you as the tenant. The example below compares them.

Worked example (illustrative figures). Four years remain at £30,000 a year, £120,000 in total.

How to keep your options open

The time to make leaving possible is before you sign:

• A tenant’s break at a sensible point, with as few conditions as possible.
• A right to assign the whole with consent not to be unreasonably withheld, and AGAs only where reasonable.
• A right to sublet, ideally including parts.
• A right to share with group companies.

Have the lease checked by a solicitor before you sign: we introduce you to an independent SRA-regulatedsolicitor who can review it. If you are already in a lease and want out, a solicitor can tell you which route your lease allows.