Struggling businesses in the West Midlands should scrutinise the terms of their commercial leases to see if large-scale savings could be made, or whether they could get out of them altogether, according to experts.

Abigail Clark, a solicitor in the commercial property team at Else Commercial Solicitors, said the cost of occupying a commercial building is likely to be one of the main overheads for a business going forward.

And with the recession deepening, a ‘get out’ option may need to be considered.

“I would advise tenants to consider their options early,” she said. “They may reach a favourable solution before cash flow problems put their business at risk.

“A lease is a complex legal document which might tie down a tenant for years, but there are often options available to dispose of it, or renegotiate terms.

“Tenants will need to consider the terms and whether they are able to assign the lease with the landlord’s consent, underlet by finding a sub tenant, or exercise a break clause.

“Another possibility would be to negotiate surrender, but the tenant may find he has to pay a premium before the landlord agrees.”

“In the current economic climate landlords are battening down the hatches against unexpected vacancies – the landlord’s lawyer will frustrate the exercise of rights as far as possible.”

She said the conditions governing breaks are often difficult and complex and courts usually required strict compliance with pre-conditions.

In one case the tenant lost his right to break the lease because he had painted the premises 13 months from the break date instead of within 12 months.

“It is important to take legal advice on break options, which are a hotly contested area,” said Clark.

“There are three types which all need legal interpretation – the unconditional break option, the conditional break option and the ‘material respects’ break option. 

“In the current market a landlord’s lawyer will scrutinise every break notice and look at ways of challenging it.”

She said that sometimes commercial leases allowed the tenant to break at a specified time during the term, or when certain specified events occurred.

“I think that could be used as an exit route for struggling business – provided they are exercised in accordance with their terms.

“In this climate a landlord might be flexible if he senses his tenant’s business is in jeopardy.”