A Brief Introduction About Mutual Lease Termination Agreement?
A mutual lease termination agreement is an agreement that is created between a landlord and a tenant. Through this agreement, they mutually agree to terminate a lease that exists between them and set out the various details as to how the lease will be terminated.
In a lease agreement, the term of the lease is mentioned, and the parties are usually required to continue with the lease until the expiry of the term. However, if the parties mutually decide to terminate the lease, they can use this mutual termination agreement to do so. This agreement will terminate the lease in accordance with the terms set out therein. The tenant has to pay a lease termination fee in exchange for being released from the lease.
Who Takes the Mutual Lease Termination Agreement?
Purpose of the Mutual Lease Termination Agreement
The purpose of this mutual termination agreement is to lay down the terms under which the lease is being terminated by the parties. It will set out all the important details such as the date on which the lease shall be terminated, the payment of any rent or security deposit that is still pending, etc.
Once this agreement has been signed by both parties, it absolves both parties from all the rights and obligations that they have under the lease. It is important to enter into a written agreement while terminating a lease, as this ensures that the conditions of the entire transaction are clear between the parties. The tenant will not be held liable in case of any third-party action against the landlord.
Contents of the Mutual Lease Termination Agreement
The lease termination agreement must first identify the landlord and the tenant with their names and their contact information. It must include the dates on which the lease came into existence and the date on which the lease is due to expire.
The agreement will then mention the date from which the lease termination will come into effect. The clause should also state that from such date, the parties will not have any rights and obligations related to the lease.
The agreement must state the amount that the tenant will be liable to pay as a lease termination fee. Usually, this fee will be paid after deducting the security deposit amount. If there is any other payment that is pending by either party, a schedule should be provided for payment thereof.
The contract should mention the date by which the tenant will move out and vacate the property. The representations and warranties of both parties must be laid down in the contract.
How to Draft the Mutual Lease Termination Agreement?
The following are the steps to follow while drafting the agreement:
- The landlord and the tenant will negotiate the crucial aspects of the transaction, such as the lease termination fee, the date by which the property will be vacated, etc.
- All of these details should be laid down in a written agreement. The parties can use a mutual termination of the lease agreement form and fill out the requisite terms.
- The agreement should be drafted in a precise manner by providing for all the important conditions.
- Both parties must go through all the clauses of the agreement and make sure that their rights are protected therein.
- The negotiations should be conducted in such a manner that both parties benefit from this agreement.
- The interests of both parties must be taken into consideration.
Benefits and Drawbacks of the Mutual Lease Termination Agreement
The following are the benefits and drawbacks of the agreement:
- Reaching an agreement regarding the termination of the lease is a much easier and cost-effective procedure than evicting the tenant.
- It is beneficial for the tenant as this agreement makes sure that the tenant does not have an eviction on his record.
- It is beneficial for the landlord as this agreement makes sure that the entire process is carried out smoothly, and the possession of the property is handed back to the landlord on the date that is mentioned in the agreement.
What Happens in Case of Violation?
A possible violation of this agreement will be if the tenant does not vacate the property on the date that has been mutually agreed to by the parties. If this happens, it is a breach of the agreement and may also be considered as trespassing on private property. The landlord may choose to serve a notice on the tenant, notifying him of this breach and asking him to vacate the property immediately. Alternatively, the landlord can have the tenant forcibly evicted from the property(1).
However, it is quite rare for this to happen as both parties mutually agree to terminate the lease, and the tenant even pays a fee for this purpose. Hence, the tenant will almost always vacate the property on the agreed-upon date.
This agreement is very important to bring about the early termination of a lease. The tenant may wish to terminate a lease before the expiry of its term for various reasons(2), and this type of agreement can help him do that. The tenant can reach a consensus with the landlord regarding how the lease will be terminated. The details of their consensus form this contract.