Legal Question in Real Estate Law in California
I need to break a 5 year lease on a commercial office space that I have been in for about one year. Financial issues are forcing me to relocate back to my original office that I own because we can't sell it as planned in this down real estate market. I simply can't afford both payments any longer.
Other operational issues have came up during this year period with the leased space, dealing with the professional appearance of this facility, the power being turned off to our office by disgruntled tenants next door in control of the breaker boxes, to the landlord's demand letter trying to raising our rents.
Some other misrepresentations made by the owners prior to us leasing can be argued along with these problems.
We need to break the lease, move on, what are the repercussions of this action? What recommendations do you have?
1 Answer from Attorneys
You have left out a couple of essential facts. (1) Is the tenant named in the lease yourself, or a corporation, LLC, partnership, etc. that carries on your business? (2) If the named tenant is not you personally, are you personally liable under a guarantee, co-signature, or the like?
It would also be worth knowing something about the profitability, liquidity and value of the business, and its longer-term prospects.
The most likely repercussion of "breaking" (breaching) your lease agreement is a lawsuit for the unpaid rent for the next four years. Of course, the landlord cannot get greater damages than it would have suffered if it made reasonable attempts to mitigate damages by re-leasing the vacant space to another tenant......but if you were supposed to pay $5,000 a month and the best the landlord can get in today's market is $3,000 a month, that's $2,000 times 48 months or so, i.e. close to $100,000 in damages even with mitigation.
Of course, if sued, you can raise the operational issues and misrepresentations as defenses, but will they hold water? My guess is they would not be an adequate defense.
I do not have enough information to make a recommendation....the personal liability issue and the value of the business being two major issues. Maybe a Chapter 11 for the business.
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