Legal Definitions - “or” lease

An "or" lease is a type of lease agreement that provides the tenant (lessee) with a specific alternative regarding their rental obligations. Under an "or" lease, the tenant has the explicit option to either fulfill their obligation to pay rent *or* surrender their interest in the leased property.

If the tenant chooses to surrender the property, they are generally released from future rent payments, and their liability is limited to the forfeiture of their leasehold interest, rather than personal liability for all outstanding rent. This structure offers the tenant a clear exit strategy by giving up the property, as opposed to being personally responsible for rent for the entire lease term even if they vacate.

• Example 1 (Residential Property):

  Imagine a recent graduate, Alex, who signs a one-year apartment lease that includes an "or" clause. Six months into the lease, Alex receives an unexpected job offer in another city and needs to relocate immediately. Instead of being personally liable for the remaining six months of rent, Alex can invoke the "or" clause, surrender the apartment keys, and formally terminate the lease. Alex's obligation ends with the forfeiture of their right to occupy the apartment, and they are not pursued for future rent payments.

• Example 2 (Commercial Retail Space):

  Consider "Boutique Blooms," a small flower shop that leases a retail space for three years under an "or" lease agreement. After one year, a major new competitor opens nearby, significantly impacting Boutique Blooms' sales, making it financially unsustainable to continue operating at that location. Rather than accumulating significant debt from unpaid rent for the remaining two years, the owner can choose to surrender the keys and vacate the premises. This action releases Boutique Blooms from personal liability for the remaining rent, limiting their loss to the forfeiture of their leasehold interest in the retail space.

• Example 3 (Agricultural Land Lease):

  A farmer, Clara, leases a parcel of land for a single growing season to cultivate a specialized crop, and the lease contains an "or" clause. Shortly after planting, an unprecedented drought devastates the region, making it impossible for Clara's crop to grow and yield any income. Because of the "or" lease, Clara can choose to surrender the lease on the land, thereby avoiding the obligation to pay the full season's rent for land that will not produce any revenue. Her liability is limited to giving up the leasehold, rather than being personally responsible for rent on unproductive land.