Can I get out of a charity shop lease early?

In these challenging times charities are having to make difficult decisions to ensure they can keep running their services and meeting their charitable objects. Many that have linked charity shops or other premises are considering closing some of these units, but if they are only partway through a lease they may not be able to simply bring their liabilities to an end.

Whether it be excess office space, a poor performing charity shop or other accommodation that is now surplus to requirements or uneconomical to run, here are our top tips on how to manage the situation:

1. First look at the lease to check if there is a tenant break right coming up – a break clause will give you the opportunity to end the lease early. Please read the clause carefully to confirm the notice period required and if there are any conditions that need to be complied with in order to exercise the break. It is important to observe strict compliance with the terms of any notice requirements, as well as any conditions, so we would recommend that you take legal advice.
    
2. Check the lease to see whether you can assign the lease to another interested party (i.e. see if there is another party who is willing to buy the remainder of the lease from you). If you know of an interested party you can then request consent from your landlord (if required), and your landlord may be under a statutory duty that means they will be unable to refuse or delay.
    
3. Can you share the space with a third party and split the lease payments between you, or could you underlet part of the property? Again, you may know of an interested party. We would recommend taking legal advice on the terms of the lease to determine what is permitted and whether the landlord needs to be involved.
    
4. In the interim, ask your landlord for a rent reduction, rent holiday or rent deferral. As part of a request to the landlord the tenant needs to demonstrate how COVID-19 has impacted the charity. The more information you can provide, the greater the chance of securing a favourable agreement, so charities need to demonstrate quantifiable losses of income (i.e. demonstrate that the charity is losing £X per week; retail income is down by £X) and explain what steps have been taken to reduce expenditure and increase income, for example, explaining if you have furloughed staff or obtained emergency loans, and so on.
   
   Explain what else you have done to mitigate losses, for example by asking for consent to derestrict funds. Explain how the charity’s financial position is impacting on daily operations and its delivery of key services and how a rent reduction would alleviate the situation. It may be helpful to re-emphasise the work that your charity carries out.
    
5. The new landlord and tenant code for leases, whilst non-binding, sets out how parties should act and is a useful reference point. They can be viewed here

Please get in touch with Stone King’s Commercial Property team if you would like advice on how to negotiate with your landlord in your specific circumstances.