The location exit process: what happens after you decide to close

The location exit process covers everything between the decision to close a site and the last obligation clearing: getting out of the lease, restoring the premises, disposing of assets, surrendering licences, ending vendor contracts, moving or releasing people, and settling what is still owed in both directions. From decision to genuine close-out it usually runs nine to eighteen months.

Almost everything written about closing a location addresses the decision, which is covered separately in knowing when to consolidate a location. This is about what happens next, which is where the cost actually lands.

The lease exit route decides everything else#

• Run to expiry: simplest when the timing happens to align, and rare, since closure decisions are performance-driven
• Exercise a termination option: clean if the notice window is still open; missing it is the single most expensive error available here
• Sublease: you stay on the hook for rent and your subtenant’s performance becomes your risk
• Assign: you transfer the lease and, depending on the document, may or may not be released, so read the release language carefully

Establish which route applies before scheduling anything else, and read the clause rather than relying on the abstract, for the reasons set out in reading every lease before the renewal clock runs out.

The workstreams, and when each one runs#

Every other workstream ends at or before the surrender date. One does not, and it is the one most often left unassigned, because the person who ran the closure has moved on and the location no longer appears on any operating report.

What you still owe after you have gone#

The make-good obligation can mean removing partitions, equipment, signage and services you installed. It is often not quantified until someone reads the clause late, priced by contractors who know your surrender date is fixed, and if incomplete by that date can drop you into holdover rent. The final operating expense reconciliation for the year you occupied is prepared after the landlord’s fiscal year ends, so an invoice or credit arrives long after you vacated; the same tests apply as any other CAM audit, with the added difficulty that you no longer have anyone on site and your audit rights window is already counting down.

What the landlord may owe you#

1. 01Overpaid estimates for the stub year, producing a credit to a closed location that is easy to lose
2. 02The security deposit or letter of credit, whose return is often slow or forgotten
3. 03Recoveries already in dispute, which do not disappear because you left
4. 04Prepaid items, which should be prorated back

The finance side#

Three entries land in the accounting period of exit: the undepreciated improvement balance, written off and detailed in leasehold improvement depreciation; lease accounting on termination, since a sublease is not a termination and accounting for it as one is a finding waiting to happen; and disposal proceeds and costs, usually lower and higher than expected respectively.

Keep the records, and know for how long#

A closed location is precisely when its records get archived beyond reach, and precisely when you still need them. Keep the lease and amendments, reconciliation statements, payment history, make-good correspondence, and photographs of the condition at surrender. The retention period is set by whichever runs longest: audit rights, dispute limitation periods, and tax retention requirements, usually years rather than months.

More across portfolio optimization.