What is Early Termination of Lease?
Many tenants and landlords find that the lease agreement they signed is no longer suitable for their needs. The tenants may need to move to a new location due to a job switch or family issue. The landlord might find that the tenant they selected did not pay on time or take care of the property. There are different types of early termination of a lease agreement templates, including early lease termination for the convenience of the landlord, early lease termination for the convenience of the tenant, early lease termination in case of default and early release of the guarantor.
In order for a lease to be broken, the terms of the lease agreement must allow it. A break or termination clause allows either or both parties to terminate the lease agreement prior to the expiration of the term . Should the lease agreement fail to have a termination clause or a tenant simply breaks a rental lease without the landlord’s permission, the tenant would continue to legally be responsible for rent payments and liability for damages.
Early termination of a lease agreement for the convenience of the tenant should include a termination clause that states that the tenant may terminate the lease upon giving notice. The tenant may pay an early termination fee (a.k.a. a termination penalty) or provide notice to the landlord within the required amount of time. The notice period may vary from 15 days to 60 days before the termination date. In most cases, a longer notice period is required if the tenant wants to avoid an early termination fee.
When a lease has an early termination clause for the convenience of the landlord, the landlord must give notice to the tenant per the terms of the contract. The landlord may have to pay penalties with the amount to be paid agreed on in the contract.
Essential Parts of a Termination Clause
A carefully crafted termination clause should include specific details regarding the notice period, penalty fees, and generally stipulate that ruining a lease early without mutual agreement can result in liability for certain costs to the landlord.
The notice period can vary widely but should ideally reflect the duration of the tenancy. A 30-day notice period may be sufficient for a month-to-month tenancy, while a 30-day or longer period may be appropriate for a long-term lease. Both parties should enjoy this right.
The issue of penalty fees is a critical point of negotiation. Tenants should ensure that penalty fees are not excessive, while landlords should appropriately protect themselves. Many landlords require a rental payment to cover for the loss of rental time required by the termination notice. This is often limited to two months of rent. If the landlord is unable to re-rent the premises because of changes in the market over the course of the notice, then the fees should decrease accordingly (i.e., if notice is given in the middle of the month and the landlord is unable to find a new tenant at their original asking price, they may be obliged to reduce the termination fee as well). In addition to these forms of penalty fees, both landlords and tenants should consider whether they can find an alternative solution in the case of early termination of the lease. If the tenant finds a new tenant to take over the balance of the lease, are they allowed to do so? If so, is the tenant responsible for any re-commission or marketing expenses the landlord incurs? If the landlord finds a new tenant, and the tenant agrees to hire a moving company to re-locate, will they be able to recover some of the moving costs as a penalty fee from the tenant? If the tenant moves out early, can someone else be placed in the premises to live (such as the landlord’s relatives) until a replacement tenant can be found? Unless the parties have enough foresight to foresee any of these points and include them in the termination clause, they are likely to argue over them when they occur.
Another major component of a termination clause is language requiring the parties to mutually agree to the early termination, and to confirm that the conditions of the lease are all terminated. A termination clause may also specify the circumstances in which a landlord or tenant can terminate the lease prior to the said notice. For example, if there is severe structural damage to the building (caused by an act of God, such as an earthquake or flood), both parties may have the right to terminate the lease without notice. If there was criminal activity on the premises, the landlord may also have the right to terminate the lease. Other circumstances in which the tenancy may be terminated with less than the specified notice (or without notice) include a breach of condition by either of the parties.
Constructing an Effective Template
To create a comprehensive early termination of lease agreement template, you must first ensure that your template contains the requisite terms that are mandated by law. Consideration of both yours and the tenant’s interests and concerns are also important when writing your template. The following steps can help you create an effective early termination template:
Make certain that the form template contains standard lease provisions. The template you are using should contain all of the terms that are considered standard in a lease agreement. Some of these terms include late fees, pet deposits, utilities and late rent payments.
The form should include a section in which the landlord can indicate whether he/she/they will retain all or some of the security deposit after early termination has occurred. California, Virginia and New York State all have laws that require landlords to make either a full or partial refund of a tenant’s security deposit.
The early termination form should state exactly what the consequences and penalties of breaking a lease are. Some examples include payment of the entire balance owed under the agreement, finding a replacement tenant, release by mutual agreement and pro-rata damages.
The eviction form should also state the date on which the agreement terminates. This is important because it sets the time frame for both the landlord and tenant to take the needed steps to terminate the lease.
Legal Considerations and Mandates
In the midst of an early termination of lease, landlords and tenants need to ensure that they are complying with any state-specific laws that may apply. For instance, most states provide tenants the right to terminate a lease after active military duty, however the Army Clause must also be satisfied. Failure to comply could render the lease and/or termination invalid and result in costly litigation. If your state does not have any such rules, it will be necessary to follow federal law when executing the early termination.
In federal law, a tenant can terminate a lease before the expiration of the contract period if he or she is a member of a household who is on active duty and who has received permanent change of station orders to depart overseas for a period of time that exceeds 90 days . In addition, federal law requires active duty members to be given at least seven days of notice of termination before the termination date can take effect. Finally, the tenant must send a copy of his or her orders, or notifications from their command, to the landlord within 30 days of receiving the orders.
Beyond federal requirements, landlords may have specific documentation requirements under state law, so it is critical to follow the laws in your jurisdiction. Nevertheless, failure to comply with these requirements may result in your tenant or you having to pay for the other party’s legal fees, depending on how you specify the resolution of disputes in your lease.
Common Issues and Remedies
The decision to move out early can be fraught with challenges beyond the initial hassle of finding a new apartment. Once the agreement is terminated, you may come across several hurdles, such as unhappy landlords, debate over remaining rental income, security deposit conflict, or having a new tenant who is unhappy with the terms. Finding a way to work through issues with the landlord is usually the preferred approach since avoiding trouble with the landlord will save you and your new tenant time and money. Negotiating early termination is preferable to submitting it to any official tribunal or court where the process of having a ruling take effect can take months. Properly made, the early termination of lease agreement template acts as a legal document for amending the terms of a lease agreement. Your landlord is best off working out where to agree and where not to in the early termination document rather than going through the court system and having to pay for damages and loss of income.
Advantages of a Strong Template
A well-drafted early termination of lease agreement template provides a multitude of benefits for both the landlord and tenant. For the landlord, the document serves as an assurance that the vacating tenant is not going to go back on their word and they are legally protected from having the tenant like a specter around their building. The benefit for the tenant is that they are able to exit the lease before the end of its term, something that is not often allowed , and sometimes without any penalties. When implemented properly, the early termination of the lease form designs to help both the landlord and tenant understand their rights in an agreement. They might not be the easiest to understand, but often the landlord depends on a template for the precise reasons in which a lease is terminated. While these forms can be difficult to read, they are still legally accepted and understood which can help smooth the exit process between both parties.