An Early (Mutual) Lease Termination Agreement is a negotiated agreement between the landlord and a tenant to terminate a lease before the original lease end date. The agreement may require consideration and will result in the release of both parties from their obligations under the original lease agreement.
Why Use an Early Lease Termination Agreement?
Landlord Reasons
Reasons a landlord may need to terminate a lease agreement early include:
- Selling the Property. An agreement may be necessary if you decide you want to sell the property the tenant is currently renting.
- Property Renovations. An agreement to terminate the lease early may be necessary to make property renovations, especially if they are for health or safety reasons.
- Property can no longer be Rented. It may be necessary if, for instance, the property is subject to eminent domain by the government or if a natural disaster destroys the property.
- Tenant Breach of the Original Lease Agreement. A mutual agreement may be the easiest and best option for the landlord if the tenant is violating the terms of the lease.
Landlord Benefits
Benefits to the landlord for signing a mutual early termination agreement include:
- Quicker Repossession of the Property. This is a huge benefit if your other option is to evict a tenant. A mutual agreement will allow you to repossess the property quicker than going through the formal eviction process.
- Fewer Expenses. Evictions are costly as well. Expenses may include filing for an eviction, hiring a lawyer and the time spent not receiving any rent. A mutual agreement to terminate the lease can save the landlord a significant amount of money.
- Leverage. If a tenant wants to move out of their rental unit early, it may give you the necessary leverage to ensure that any outstanding issues with the tenant are taken care of promptly. A mutual agreement can include terms to ensure that the tenant pays any money owed and returns the property in good condition before they are released from their obligations to the landlord.
- Certainty. An agreement can provide certainty in an uncertain situation. Knowing when the tenant is going to move out and establishing a payment schedule for any money owed is a great benefit for landlords.
Tenant Reasons
Reasons a tenant may need to terminate a lease agreement early include:
- Unsafe living conditions. If the premises are unlivable or unsafe, then it may be time to talk to your landlord about terminating the lease agreement early.
- Job or Relationship.If the tenant gets a new job or relationship, or one ends, the current rental unit may no longer be feasible.
- Pets or Children. Based on either pets or the size of your growing family, the current rental unit is no longer practical.
- Military Service. If you are in the military you may have to move to a different location as part of your duties. Most states have laws in place to provide early termination for active-duty military members.
- Health problems or Care for Sick Family Member. You may need to move out of your rental unit to address personal health needs or to take care of a sick family member.
Tenant Benefits
Benefits to the tenant for signing a mutual early termination agreement include:
- Maintain a Tenant’s Good Standing. If a tenant violates their lease, a mutual agreement keeps an eviction off of their rental history. It also, if applicable, ensures they can maintain their eligibility for any rental subsidies they are receiving. Getting a rental unit after an eviction can be a difficult challenge for a tenant.
- Specific Move Out Day. It may be that a tenant has justified reasons for terminating the lease early. Even so, agreeing to a specific move-out day will help reduce the chance of there being a later dispute with the landlord.
- Formalize Details. This could include things such as setting up a payment schedule for money owed or any other responsibilities that must be completed before ending the lease.
What to Include in an Early Lease Termination Agreement
This type of agreement can contain a variety of information depending on the circumstances for early termination and the terms of the original lease agreement. When writing the agreement, make sure it is specific to your situation and any requirements based on your lease agreement and state law.
Attach the Original Lease Agreement
Most terms in the lease agreement will likely not be included in this agreement. Landlords should provide the original lease agreement and highlight any applicable sections, including any clauses that discuss early termination.
Terms and Conditions of Termination
The agreement should be detailed and professional, and provide all information necessary to properly terminate the lease agreement. Include the following terms and conditions in every Early Lease Termination Agreement:
- Applicable information from the lease.
- Mutually agreed-upon terms for termination of the lease agreement.
- Specific instructions about the termination of the lease agreement.
Details of the Property, Parties & Agreement
When writing this agreement you may include the following specific information:
- Date.
- Landlord’s name.
- Tenant’s name.
- Address of the leased premises.
- Original lease terms.
- Lease beginning date.
- Lease ending date.
- Monthly rent amount.
- Reference to the early termination clause, if applicable.
- New lease termination date.
- Security deposit amount and any amount being withheld.
- The amount and payment schedule for any money owed to one party by the other.
- Any other terms of consideration given for the agreement (e.g., early termination fee).
- Mutual release from the terms and conditions of the original lease agreement.
- Landlord’s signature.
- Tenant(s)’ signature.
Both the landlord and tenant should have a signed copy of the agreement.
What’s Next?
Tenant Move Out Checklist
After agreeing to mutually terminate the lease there are still some final items that need to be addressed. Tenants should still make sure that they follow the requirements outlined in their Tenant Move Out Checklist. Landlords will want to schedule a time to inspect the premises with the tenant before they move out. If you used our Move In Inspection Checklist, this will be a great tool to have for conducting the Move Out Inspection as well.
Finding a New Tenant
As soon as you know your tenant is moving out, you should begin the process of finding a new tenant for the rental unit. This includes screening tenants as early as possible. If repairs are necessary, make sure they are taken care of before beginning your new tenant’s lease.
For specific state information on ending a lease early, click here.
