The provisions of a lease bind tenants until the end of the lease period. If a tenant wants to leave premises before a lease term expires, there are three options: surrendering, transferring, or subletting.

The best way for a tenant to end a lease early is to surrender the lease. Surrender cannot be forced on a landlord. Unless the landlord has a replacement tenant, at a higher rent, a landlord might refuse to accept surrender.

Ordinarily, after surrender, neither the landlord nor the tenant has any liability or obligation to the other. For this reason, the landlord should ensure that all the tenant's obligations under the lease have been complied with, and rents paid, before signing or accepting the surrender.

For reasons of certainty surrender is best achieved by way of a signed document, detailing any conditions (such as a termination payment by one to the other). Surrender can also be effective if the tenant acts in a manner demonstrating an intention to surrender, and the landlord demonstrates acceptance. For example, if the tenant hands the landlord the keys, and the landlord takes them without complaint, surrender may be achieved.

If a landlord is unwilling to accept surrender, a tenant might next consider transferring (also known as assigning) a lease to a third party known as an assignee. Such a transfer means that the assignee "stands in the shoes of the tenant" and is liable to the landlord, as the tenant would otherwise be.

A disadvantage to transferring a lease is that a tenant remains liable to the landlord, in the event of default by the assignee. For this reason, a tenant might ask the landlord for a release from liability under the lease once the transfer has taken place. There may be no obligation for a landlord to give such a release.

If neither surrender nor a transfer is available a tenant might consider subletting. When a tenant sublets, the tenant remains liable to the landlord under the lease as before. A wise subletting tenant shall ensure, as far as possible, that all lease obligations are passed to the sub tenant. However, even in those cases, the tenant remains ultimately responsible to the landlord.

A lease often has provisions that set out tenant and landlord responsibilities for each of the three scenarios outlined here. There is no such thing as a "standard lease" and so it is important to know lease conditions before signing a lease.

In the case of surrender, the lease might state that one or both of the tenant and landlord have the right to cause surrender, in certain circumstances e.g. a notice period and payment of a monetary sum, by one party to the other.

As an inducement to a tenant to take a lease, landlords often write into leases the circumstances under which leases can be transferred to assignees. Such circumstances are usually that the assignee is capable of paying rent and complying with other tenant obligations for the remainder of the term, or if not that at least one suitable guarantor is provided. Sometimes, though not always, the lease states that the tenant is released from lease obligations post transfer.

Similarly a lease often states the circumstances under which a tenant may sublet. A landlord shall be interested to make sure the sublet contains acceptable conditions because for practical reasons, the subtenant can become the landlord's immediate tenant. This may happen, for example, when a tenant becomes bankrupt, because a landlord cannot remove a subtenant in Bermuda without a court order.

Sometimes a tenant wants to share possession of premises. The ability to share depends on what the lease says, or does not say. Often leases specifically state that sharing is not permitted, but if the lease is silent the tenant may share.

Whatever a lease says the landlord and tenant are usually free to negotiate fresh terms and conditions to allow for circumstances not otherwise permitted by the lease. Such terms and conditions might be set by the negotiating strength or otherwise of each party.

Subletting or sharing by a non Bermudian company may require a license from Government, under section 123A of the Companies Act 1981, and a time period to obtain such should be allowed for by affected parties.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.