As lawyers and firms continue to evaluate whether they should work in a conventional office, work from home, or use a hybrid model, one problem they must confront is what to do about their existing office lease. In a typical scenario, their office lease will not have any unilateral right to terminate or shorten the lease, or reduce the size of the leased space. But what exactly are the consequences of pulling up stakes and leaving early?

Generally, a commercial lease runs for the length of the term as stated in the lease, with no right to end it early. For lawyers and law firms looking to bail out before the term expires, one obvious approach is to try negotiating for an early termination. Some landlords, however, may be reluctant to agree to that where they have a solvent tenant, especially when market rents are falling.

Absent a negotiated termination, tenants (and subtenants for that matter) should be aware of the potential consequences of terminating a lease early. Stated differently, what are the landlord’s remedies if a tenant vacates the space and stops paying rent?
In such circumstances, the landlord typically will have two main remedies: (1) terminate the lease and sue for damages, or (2) keep the lease in force and sue periodically for rent as it comes due. The financial and practical implications for these options are significant.

Under the first option, the landlord would rely on California Civil Code section 1951.2 to terminate the lease and sue for the value of back rent, future rent (reduced to present value), and certain other damages. Depending on the remaining term of the lease, the future rent figure may be considerable. Importantly, in this scenario, the landlord has a duty to mitigate damages by trying to find a replacement tenant after lease termination. To the extent that the landlord finds (or should have found) a new tenant, the income from that new tenant can reduce the damages exposure. And while there are certain prerequisites for the section 1951.2 remedy to apply, they generally will be satisfied in a professionally prepared commercial lease.

Under the second option, the landlord would look to California Civil Code section 1951.4 to keep the lease in force and sue for the rent as it comes due. This remedy allows the landlord to sue promptly for past due rent, or wait for additional months of back rent to accumulate before heading to court. As a practical matter, the tenant in this situation has an incentive to mitigate its own damages by subleasing or assigning the lease. Indeed, one of the prerequisites for section 1951.4 to apply is that the tenant must have a right to sublease or assign the lease. Other requirements and details also apply.

Under either of the foregoing scenarios, tenants should also expect that the landlord will seek attorney’s fees and costs, which most commercial leases allow for the prevailing party.

One additional issue to consider is whether any pandemic-era commercial lease ordinances might afford relief to tenants seeking to minimize liability in connection with ending a lease early. The short answer is that it is not likely. While a number of jurisdictions enacted rules in 2020 to prevent or delay evictions based on the non-payment of rent due to the pandemic, there are very few provisions that may allow for early termination, and even those may be further limited (such as by applying to commercial property that is not zoned for office use).

While the foregoing is intended as a high-level overview, commercial leasing is a technical area of law with many fact-dependent issues. Anyone seeking to terminate an office lease early should consult with experienced counsel.