Expert: Stephen A. Cross, CCIM - 2/9/2009

Question
Hi,

We bought a business from another seller few years back. Due to current economic condition, the business is not doing well and we are loosing lot of money. We still have 1 year remaining on the lease but thinking of terminating the lease early and had few questions.
1. If we break the lease, are we 100% responsible for any lease termination charges or the original owner is still responsible. Note that when we signed the lease we continued with the existing lease so the previous lessee is still on the contract.
2. What are the consequences of terminating the lease early.

We didn't want to go this route but we have no other option.

Thanks,
Tonny

Answer
Tony:

1. If the landlord assigned the Lease to you they will likely look to you to pay the rental amounts due under the Lease.

2. If you personally guaranteed the Lease (obligations),and have assets, the landlord could pursue you for amounts due under the lease, less any monies he/she is able to collect during the balance of your lease term.

3. Generaly, landlords have an affirmative duty to use their best efforts to re-lease the Premises in order to mitigate any damages to the Tenant (you), and perhaps the person you purchased the business from (if they were not released from any liability under the Lease.)

4.  Early termination remedies include negotiating a buyout amount with the landlord. For more on this subject, please see the article titled 'Exit Strategies' at www.crossrealty.com.

Please let me know if you wish additional clarification in this matter.

Steve