Should it become necessary for a tenant to wind down its operations in a location or decrease the amount of space it leases, tenants have some options. Each of these options are better suited in some situations than others, and each have their own drawbacks and consequences, so it is important to discuss which option is best with an experienced professional.
A tenant could discuss its options with the landlord directly (whether to shorten the lease term, surrender the space early or a portion of the premises). If the landlord is amenable to amending the lease, it is important to have an experienced commercial leasing attorney review the agreement to ensure the tenant is fully aware of the agreement that the tenant is entering into. Some provisions in a landlord drafted lease modification may have an unexpected impact on the tenant’s rights and remedies.
A tenant may also sell its business, assign the lease, sublet all or a portion of the premises and/or license all or a portion of the premises. In any of the foregoing events, it is important to perform these transactions in accordance with the lease or else risk being held in default by the landlord.
If applicable, a tenant may also opt to exercise the “good guy” provision of the guaranty to release the guarantor from accruing further liability under the lease. It is very important to carefully review and follow the procedure set forth in the guaranty to properly exercise the surrender of the premises. Failure to properly perform a surrender of the premises may result in the guarantor remaining liable for its obligations.