If we have 2 1/2 years left on rental business lease but our business is loosing money every month, what options do we if we gave our personal guarantee?

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If we have 2 1/2 years left on rental business lease but our business is loosing money every month, what options do we if we gave our personal guarantee?

We signed the lease 10 years ago. How can we get out of the lease? The landlord is a big fortune 500 corporation.

Asked on January 13, 2015 under Real Estate Law, New Jersey

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 6 years ago | Contributor

You don't really have any good options, other than trying to negotiate with the landlord to see if they will let you out of the lease early, or trying to find someone to take over (take "assignment" of) your space from you, assuming that your lease does not prohibit assignment. (If it does, that would be legal--leases may prohibit assignment.)

The problem is that a lease is a contract, and your personal situation or difficulties (i.e. that you are losing money) is not grounds to escape your liabilities under a lease. Unless the landlord breaches its obligations in some significant way (such as by not providing habitual or useful space) or the space otherwise becomes unusuable through no fault of yours (e.g. a fire), you will be bound to your lease. The discrepancy in size between you and your landlord also does not make a difference.

Furthermore, personal guaranties are very enforceable in commercial lease settings, so your landlord could definitely sue you to recover all amounts due for the entire remaining period or term of your lease should you break you lease, default on paying, etc.

Two less-good options, but things to consider:

1) Sub-letting the space (all or some): this is not as good as assignment, since you are still responsible under the lease if you sublet; your subtenant is liable to you, whle you are liable to the landlord). Even if you can't bring in enough to cover all your rent, it can mitigate, or reduce, your losses.

2) If all else fails, you may need to consider bankruptcy, which would work against a debt likes this.


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