When drafting a commercial lease, it is imperative that all sides know exactly what clauses they can use and how these may alter the agreement. Often, various clauses help to define rights and responsibilities on both sides once the agreement has been reached.
One example of this is a break clause. When used in a commercial lease, this gives either party the ability to end the lease earlier than the agreed-upon timeframe. In other words, it is a legal way to break the contract, and both sides have agreed to it upfront. If certain conditions are met, then either the tenant or the landlord may decide that they want to end the standing arrangement.
Sales numbers
For example, when leasing commercial real estate, tenants may be concerned that it is not an optimal location and that they are not going to earn enough money for the business to be viable. They may state that, if their sales numbers do not hit certain benchmarks, they can break the lease early to seek a new location.
Why would a commercial landlord agree to such an arrangement? It depends on the situation. In some cases, landlords may have trouble renting out a certain commercial space, so they are just happy to get a tenant, even if there is the potential that they will leave early.
In other cases, break clauses can also help commercial landlords. If the business is not profitable, that tenant is not going to be able to pay their rent, which may lead the landlord to evict them. But that can be a complex and time-consuming process, whereas giving the tenant the ability to simply break the lease early may be in everyone’s best interests.
This is just one example of the intricacies of commercial real estate contracts, but it helps to show why both sides need to fully understand their rights and responsibilities.
