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Right to Terminate Free Information On Right to Terminate Finally, tenants should consider providing themselves an escape clause. When starting a business, a high level of optimism and the excitement is typical and understandable. However, the actual business results sometimes fall short of what was expected. Right to Terminate - Example For example, assume you had expected sales of $80,000 per month for your business and thought the very lowest level that could possibly occur would be $20,000 per month. Even though the $20,000 per month seemed like a very pessimistic scenario, you were comforted that the business would be profitable at this level. At least you'd be all the pay your expenses and pay yourself a barely adequate salary. Example Continued Unfortunately, the pessimistic scenario turned out to be wildly optimistic. For whatever reason, the business is only generating sales of $6000 per month. This is inadequate to pay your cost of operations. What Rights Should You Require? Should you have a right to terminate your five-year lease in this scenario? If you do terminate the lease, what is a reasonable amount to pay for expenses incurred by the landlord? Beware of the Consequences Although termination clauses and personal guarantees may seem like an arcane nuance when negotiating the lease for your new business, they are critical factors. If you personally guarantee the lease and do not have an option to terminate the lease if your business performs poorly, in a worst-case scenario you are faced with personal bankruptcy or funding an operating deficit for a long period of time. Conclusion This concludes the article on leasing office space. By defining your office space criteria, selecting an experienced broker and carefully negotiating the lease, you have reduced the time to find space and negotiate the lease. In addition, you will have mitigated your exposure in the event your business is not successful. Previous Chapter Leasing Office Space - Financial Event of Default
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