Exiting a commercial lease in Arizona can be challenging, especially when your business circumstances change and you need to consider an early exit. Fortunately, you have several legal options available that help ensure a smooth transition. Understanding these strategies and the legal requirements you need to follow is essential for protecting your financial interests while preparing to move out.
Lease assignment
One option is to transfer your full lease rights to a new business entity. However, most Arizona leases require the landlord’s approval before you can assign the lease.
Even so, landlords usually cannot refuse approval without a good reason if you can show the new tenant can afford the lease. Getting a written release can also help ensure you are not responsible if the new tenant defaults.
Sublease arrangement
If you may want to move back into the space later or cannot find someone to take over the full lease term, you can exit by subletting the space. You can move out while a subtenant pays the rent. Even though you are no longer in the space, you still remain mainly responsible to the landlord and often serve as the middleman.
Early termination and buyout agreements
Sometimes, reviewing your lease closely can help confirm if there are terms that let you end it early. There may be a kick-out clause that lets you terminate the agreement if your business meets certain conditions, such as missing sales targets or opening deadlines.
If your lease has no built-in exit rights, you can try to negotiate a buyout or surrender agreement by paying a one-time amount to end future duties. Before agreeing to anything, comparing the buyout to the costs you would still owe can help you see which option is better.
Landlord breach and constructive eviction
You may also end a lease early if the landlord violates the agreement in a way that seriously limits your ability to occupy and operate the space. Under Arizona law, the interference must be significant enough to render the premises untenantable. This may support a constructive eviction claim, though you must move out within a reasonable time.
If you do move out, the landlord typically must take commercially reasonable steps to re-rent the space to reduce damages. They generally cannot leave it empty and charge you for the remaining rent.
Safeguarding your business interests
When planning to exit your commercial lease, choosing the option that reduces your liability and protects your business going forward is best. A lawyer can review your specific lease language and help you find the best course of action.