Tenant Exit Strategies: Six Ways Out of an Office Lease, Compared

The six exits side by side

• Termination option. Only if you negotiated one. Give notice by the deadline, pay the fee the lease sets, and the obligation stops on the termination date.
• Sublease. The route most tenants end up on. You remain the tenant, collect from a subtenant and cover any gap between the two rents until expiry.
• Assignment. A new company steps into the lease and pays the landlord. You usually stay liable if it later defaults.
• Surrender or buyout. The lease ends by agreement, for a payment you negotiate. With a signed release, nothing follows you.
• Partial give-back. Part of the floor returns to the landlord, through a contraction right or because the landlord wants it. You keep leasing the remainder.
• Good guy exit. Notice, a clean handback and rent paid to the day you leave release the person who signed the guarantee. The company's obligation continues.

Which exit fits which tenant

A company that is winding down looks to the good guy conditions first. One that is shrinking but staying looks at a partial give-back or a sublease of the surplus. One that has outgrown the floor prices a surrender against a sublease.

That comparison is arithmetic. Add up the rent still due, estimate how long the space would take to sublet and at what discount, and add the commission. The total is the figure a surrender offer has to beat. Sublet space trades at a discount to direct space, and the less term that remains, the deeper the discount. The exit guide works one case through.

Leaving without a penalty, and leaving before the lease starts

Leaving with nothing more to pay is possible in two situations only: the lease itself provides the way, for instance a termination option or a remedy triggered by the landlord's own failure, or the landlord agrees. A change in your business does not count.

Backing out before move-in is rarely free either, because the lease binds from the day it is signed. If plans change, tell the landlord early, ideally before construction begins, when the floor is easiest to lease to someone else. In both cases ask a New York real estate attorney to review the lease and the guaranty first. Nothing here is legal advice.

What to negotiate up front next time

The cheapest exit is the one agreed while the landlord still wants the deal.

• A termination option with the fee written as a formula.
• A contraction right, so space can be handed back in part.
• The right to sublet and assign on a reasonable-consent standard, with recapture narrowed. The assignment and sublet clause explains each term.
• A good guy guarantee whose notice period is short.

The next space, on a shorter commitment

A company that has just paid to leave a long lease rarely wants another one. After an exit, a furnished or prebuilt floor can usually have a team working again two to four weeks after signing. Twelve months is about the shortest term a landlord will accept on a private floor, 24 or 36 is the norm, and brevity is priced into the rent. The live floors on this page are furnished or prebuilt, the shortest route from an exit to a working office. Flex by Nomad is the serviced version.