Generally, unless you have made some sort of an agreement with the landlord, whereby your landlord agrees to release you from your obligations under the lease, you will be responsible to pay any outstanding rent arrears or any future rent even when you turn in the keys and walk from the commercial space. Please note that commercial landlords are not obligated to mitigate their damages (not required to act in good faith to find a replacement tenant).
This could also complicate matters, if there is an acceleration clause in the lease agreement. This means that, if you default by not paying your rent and you vacate, a landlord files an action to recover not only any outstanding rent but also seeks to enforce the acceleration clause to get an immediate judgment against the tenant for any future rent, through the remainder of the term of the lease.
It is important to carefully review your lease agreement and the rider, to see if there is any early termination language or a “good guy guarantee” that would allow you to terminate your lease early. However, for a “good guy guarantee” to apply, you must not be in violation of the lease agreement. For instance, you must not owe any rent or otherwise be in default under the lease.
Accordingly, at the outset, it is essential to hire an experienced legal counsel to help you negotiate with your landlord to release your business and you personally from any current and future liability.
In the event negotiations are unsuccessful and an action has been filed against the business and you personally, we at Singh & Rani LLP examine each case carefully, including dissecting the language in the lease agreement very carefully to interpose appropriate defenses.
Although the courts are dealing with unprecedented legal issues due to Covid-19 pandemic, we are seeing some case law being developed that may suspend tenants’ obligations to pay rent for the Covid-19 period. An experienced litigator will explore all of appropriate defenses to any action filed by the landlord to collect rent including but not limited to frustration of purpose, casualty clause, impossibility of performance, constructive eviction, force majeur, prohibited performance, tenant’s compliance with the lease, suspension of personal guarantee for Covid-19 period, and breach of covenant of quiet enjoyment.
We have assisted numerous small business owners in similar circumstances deal with their landlords in negotiating an exit with their landlord, early termination of the leases and settlement of claims.
The information above is intended to provide limited information only and it is not legal advice. If you are interested in discussing your defenses against your landlord or negotiation strategy with your landlord, or otherwise need further guidance in this or a related area of law, SINGH & RANI, LLP can assist you, please call at 212-729-6920.