Commercial Lease Buyout Calculator
Estimate the cost of terminating your commercial lease agreement early.
Remaining Lease Value:
$0.00
Calculated Penalty:
$0.00
Total Estimated Cost:
$0.00
How to Calculate a Commercial Lease Buyout
A commercial lease buyout occurs when a tenant wishes to exit their lease agreement before the contract term expires. Most commercial leases include a "Liquidation Damages" or "Early Termination" clause that specifies how much the tenant must pay to be released from their obligations.
The standard formula used by most landlords involves taking the remaining rent owed and applying a percentage (the penalty) plus any additional costs required to return the space to its original condition.
Real-World Example:
Suppose you have 12 months left on a lease with a $4,000 monthly rent. Your contract specifies a 50% buyout penalty. You also estimate $2,000 in repairs to the flooring.
1. Remaining Rent: $4,000 × 12 = $48,000
2. Penalty (50%): $48,000 × 0.50 = $24,000
3. Total Cost: $24,000 + $2,000 = $26,000
Suppose you have 12 months left on a lease with a $4,000 monthly rent. Your contract specifies a 50% buyout penalty. You also estimate $2,000 in repairs to the flooring.
1. Remaining Rent: $4,000 × 12 = $48,000
2. Penalty (50%): $48,000 × 0.50 = $24,000
3. Total Cost: $24,000 + $2,000 = $26,000
Key Factors in Buyout Negotiations
- Market Conditions: If the commercial real estate market is "hot," a landlord might accept a lower buyout because they can re-rent the space quickly at a higher rate.
- Unamortized Tenant Improvements (TI): If the landlord paid for your office renovations, they will likely demand the remaining balance of those costs be paid back in full.
- Subleasing Rights: If your buyout cost is too high, check your lease for subleasing clauses. Finding a new tenant yourself might be cheaper than a direct buyout.
- Security Deposit: Ensure you clarify whether your security deposit will be applied toward the buyout cost or returned separately.
Common Buyout Formulas
Landlords typically use one of three methods to determine the buyout fee:
- Flat Percentage: Paying a percentage (often 50% to 100%) of the remaining rent.
- Fixed Month Penalty: Paying a set number of months (e.g., "The next 4 months of rent").
- Unamortized Costs + Rent: The sum of remaining TI allowances, broker commissions, and a smaller rent penalty.