Tenant wants to know if they can buy themselves out of lease

[Mike Buckley]

I have a Commercial office space tenant in a 3 year lease who after 5 months decided they cannot afford to keep the space and want to know If they can buyout the lease. Has anyone arranged an agreement like this before? I understand I have an obligation to market the space. However would It be in my best interest to take a lump sum payment? The rent is $750 per month they have a last month rent and security deposit of $750 as well. What would be a reasonable amount for a buyout?

[Nathan Gesner]

@Mike Buckley this is an important thing to develop a policy for, whether commercial or residential.

I already disagree with your approach. If 4x the rent were the charge, I would not use last month's rent or the deposit. Last month's rent covers last month. The deposit is not to be touched until the lease is terminated, the tenant is out, and the property is 100% back in your control. Then it's applied towards unpaid charges, cleaning, and repairs. If none, then you refund it.

Look at it this way: your tenant owes you 31 months of rent. By breaking the lease, you are losing those 31 months, you are taking on utilities and responsibility for the property while it's vacant, and the hassle of finding a new tenant. If it takes four months to find a new tenant, you've not been reimbursed for utilities, your time, or your trouble!

I would require written notice and a five-month termination fee. The tenant should move out and hand you payment in certified funds (no personal or business check that has to clear). Inspect the property and refund the deposit accordingly. If it rents in four months, the additional month of rent should compensate you for most of the utilities and your time. If it rents in two months, you've earned a bonus.

This may sound like a harsh penalty but this is what "adulting" looks like. They signed a contract and should honor it or pay a stiff penalty for violating it.