Can I get out of my commercial lease when new owners arrive?

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Question:

I currently lease a 4,500 square foot office and am presently three months behind on rent. I cannot catch up due to slow business. The building is about to be sold. The present landlord is asking me to furnish a form labeled an "Estoppel Certificate," stating I lease the premises and will continue. I want to get out of this lease. Can I do so under these conditions?

Answer:

This strange malaise could be an opportunity in disguise. Legally, your situation will not change with a new owner. The lease will continue.

But the law is not everything; real life counts for something, too. Chances are better than average that the new landlord would rather not inherit a struggling, unhappy tenant, especially if the space is attractive, and potential, solvent tenants abound. So if the building is full or nearly full, and if rents have gone up in your town, the new landlord may prefer someone new in your space -- preferably someone with deeper pockets.

This could be the perfect time to try to cut your losses. Go to the new landlord. Explain your financial plight. Ask if you can walk away from the lease, but be prepared to pay a two- or three-month separation fee if you absolutely must. It is even better if you can produce another tenant who is willing to take over your space.

Think thrice before signing that estoppel certificate, which is kind of an "all's well with this lease, landlord and tenant." First, check your lease. If it is silent on the subject, as most are, you are free to ignore the landlord's request.

Also, pay attention to the actual wording of the certificate. If it states what most of them do, it is merely attempting to secure some assurance for the new landlord that you have no legal claim against the current landlord. If that's all there is, signing it would not be too terrible. But if it does contain a commitment for you to continue as a tenant, you are right to resist. Moreover, most certificates ask the tenant to certify that the tenant isn't behind on the rent -- something you can't do.

Maybe the current landlord will let you cancel the lease if you kick up a ruckus. Playing the role of The Squeaky Wheel, you may simply get to roll away.

To learn more, see Nolo's section on Business Spaces & Commercial Leases.

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