Anyone who leases commercial real estate in Georgia should be aware of several concerns.
Most commercial leases, for example, are not covered by the consumer protection laws that govern residential leases. There are no caps on security deposits, and it is not easy to break or change a commercial lease.
If you locked yourself into a long-term commercial lease in the Metro Atlanta area sometime between the last five and ten years, you are probably paying much more in rent for your office space or storefront property than the newer competitors in your area. This is where a corporate law firm can help.
SHOULD YOU EVER BREAK A LEASE?
Seeing that their lower overhead gives them a competitive advantage, you might be tempted to break your own lease and start over at some new location in or near Atlanta.
As a corporate lawyer who serves businesses in Cumming, Atlanta, and all over northern Georgia, I am often approached by clients who want to take advantage of the lower commercial leasing rates that Fulton, Cobb, and DeKalb Counties have to offer.
However, this type of play on falling real estate and rental prices can be genuinely problematic for parties on both sides of a corporate lease agreement.
HOW CAN AN ATTORNEY HELP?
Unlike residential leasing, commercial property landlords are under no obligation to mitigate their damages by locating a new renter for the location. They are actually able to keep a vacated space unrented and seek full restitution for the duration of the lease.
This is a significant reason why it is prudent for commercial enterprises to have a lease reviewed by an experienced business litigation attorney before signing it – and especially before breaking it.
An alternative solution might be to have your business attorney attempt to negotiate a release from your rental agreement.
For example, your lease most likely has an acceleration clause which allows the landlord to accelerate the entire amount of the rent that would be owed under the commercial lease (if it’s broken) and then pursue your company for the entire balance.
COULD YOU FACE PERSONAL LIABILITY FOR BREAKING A LEASE?
In addition, more likely than not, you or your partners signed personal guarantees of the commercial lease which subject you to personal liability for the entire amount owed on the lease agreement.
Consider this example: A Georgia corporation signed a ten-year lease for a piece of commercial property in downtown Atlanta in 2004. The monthly rent on the location is $10,000.
Now, in 2012, they have located a new property in Cumming, Georgia that would suit their current needs for only $5,000 per month. They choose to break the current lease in Atlanta and move to the new location with two full years left.
They are sued, and the landlord’s lawyer is able to recover the full amount of the terms of the lease.
IS IT “WORTH IT” TO BREAK A LEASE?
That’s $10,000 per month for 24 months for a total of $240,000. That figure does not include the defendant’s attorney’s fees to fight the suit. It will take the Atlanta business 48 months (four years) to break even on the move.
If your company is attempting to be released from a lease, contact a reliable, professional Atlanta business litigation attorney as quickly as you can. Otherwise, you could become the defendant in a rather costly breach of lease lawsuit.