How To Terminate Your Commercial Rent Agreement

Our clients often undergo business changes that impact their current commercial rent agreement and they have to learn about ways (if any) to terminate it. Conversely, other companies are managing a growth in their workforce and considering the expansion of their headquarters. In both scenarios, if you are already renting an office, the decision of whether and how to terminate your commercial rent agreement arises. This decision shapes steps in terminating your office space lease and starting a search for your new office space.

Despite your business changes, the process of terminating your commercial rent agreement is far more complicated. In some cases, it’s even impossible.

Office Market’s commercial real estate experts have compiled a set of 5 STEPS to assist you in comprehending the procedure for terminating your office lease before its expiration and making informed decisions.

Learn Your Current Commercial Rent Agreement

Before starting the search for a new office, make sure you learned your existing lease agreement. Typically, a commercial lease agreement in Malta spans five years: a mandatory two-year di fermo and an optional three-year di rispetto period. Di Fermo defines the obligatory minimum lease duration. On the other hand, Di Rispetto signifies the optional period post-di fermo expiry. During this period, the tenant may terminate the lease with X months’ notice without incurring penalties.

If the Di Fermo period has already lapsed, schedule a meeting with your landlord and verbalise your intention to vacate the premises.

Assess the Termination Clause in Your Commercial Lease Agreement

Should your lease is still within the Di Fermo period, it is crucial to examine the termination clause outlined in your rental agreement. This clause is vital in a commercial lease, providing specific details on the measures taken in case of terminating your office space lease agreement. It also outlines the associated costs if you choose to surrender your lease.

Meet Your Landlord to Explore Options to Terminate Commercial Rent Agreement

Now that you have a clear understanding of the permissions and restrictions outlined in your rental agreement regarding early termination. It’s time to schedule a meeting with your landlord.

During this meeting, articulate the reasons behind your consideration of termination and discuss potential options in reaching a mutual agreement. It’s essential to note that if the landlord is unwilling to reclaim premises, they cannot be compelled to do so. If the landlord rejects the termination proposal, the rental agreement remains in effect.

Find a Replacement For Your Office Space

Consider proposing to locate a replacement tenant and manage the transition process. Your real estate agent might already have a company in their network seeking an office space similar to yours. And they could be interested to assume the lease under the existing terms. Ensure you secure your landlord’s complete approval before commencing any advertising or proceedings in the property market. Be prepared to cover an agency fee associated with securing a new tenant.

Explore Subletting a Portion of Your Office Instead of Terminating the Lease

If your landlord is unwilling to agree to the proposed commercial rent agreement’s termination terms, and securing a replacement tenant doesn’t align with your preferences, an alternative to consider is subletting the premises to a subtenant. This becomes a viable choice, especially if you’re downsizing your office but wish to retain tenancy or if you aim to share rental expenses. Keep in mind that obtaining the landlord’s consent is always necessary for subletting premises.

Having a trusted commercial real estate agent by your side is highly recommended in such scenarios.

For additional information or assistance with your office space search in Malta, reach out to us at info@officemarket.mt or +356 7949 5969.