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COVID-19 and Lease Negotiations: Early Termination Provisions

By Ann E. Ryan and Adrienne B. Koch
January 01, 2022

"Contracts are like hearts, they're made to be broken," says a smirking Michael Keaton, playing Ray Kroc in the movie The Founder. As many tenants discovered during the COVID-19 pandemic, this philosophy is not true of commercial leases. Unless the lease specifically gives the tenant a right to terminate, the tenant cannot simply walk away from its lease without risking substantial liability.

During the pandemic, some tenants were able to negotiate termination agreements with their landlords. But even though a landlord may agree to terminate a lease to regain control of a defaulting tenant's space without costly and lengthy litigation, typically a defaulting tenant that otherwise has no contractual right to terminate its lease will be in a much weaker bargaining position with respect to the conditions for termination (which often include a hefty fee).

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