Lease Termination: 10 Steps to a Smooth Exit

Last Updated on April 18, 2024 by Morgan Beard

As a commercial real estate tenant, there may come a time when you need to terminate your lease early. Whether it’s due to business relocation, downsizing, or other unforeseen circumstances, navigating the lease termination process can be challenging. To ensure a smooth exit and maintain a positive relationship with your landlord, follow these ten steps.

Step 1: Review Your Lease Agreement

Before initiating the lease termination process, thoroughly review your lease agreement. Look for any clauses related to early termination, notice periods, penalties, and other relevant information. Understanding your rights and obligations under the lease is crucial for a successful termination.

Step 2: Communicate with Your Landlord

Once you’ve decided to terminate your lease, promptly inform your landlord of your intention. Schedule a meeting or send a formal written notice, clearly stating your reasons for terminating the lease and your proposed exit date. Be professional, courteous, and transparent in your communication.

Step 3: Provide Sufficient Notice

Most lease agreements require tenants to provide a specific notice period before terminating the lease. This notice period can vary, typically ranging from 30 to 90 days. Ensure that you give your landlord ample notice in accordance with the terms of your lease. Failure to provide sufficient notice may result in penalties or legal consequences.

Step 4: Explore Lease Termination Options

Depending on your lease agreement and relationship with your landlord, there may be several options for terminating your lease:

• Early Termination Clause: Some leases include an early termination clause that allows tenants to end the lease early by paying a predetermined fee.
• Subletting or Assignment: If permitted by your lease, you may be able to sublet your space or assign your lease to another tenant, relieving you of your obligations.
• Lease Buyout: Negotiate with your landlord to buy out the remaining term of your lease. This may involve paying a lump sum to cover the rent for the remaining months.

Step 5: Negotiate with Your Landlord

If your lease doesn’t provide clear options for early termination, engage in open and honest negotiations with your landlord. Explain your situation and see if you can reach a mutually beneficial agreement. Your landlord may be willing to work with you, especially if you’ve been a reliable tenant and have maintained a good relationship. This is a great time to employee legal counsel and legal advice to help you navigate your lease termination options.

Step 6: Document Everything in Writing

Once you’ve reached an agreement with your landlord, ensure that all the terms and conditions of the lease termination are documented in writing. This may include the termination date, any fees or payments, the condition in which the property should be returned, and any other relevant details. Having a written agreement protects both parties and prevents misunderstandings.

Step 7: Fulfill Your Obligations

Before vacating the property, make sure you fulfill all your obligations as a tenant. Some lease agreements have termination clauses or you can try to negotiate a mutual termination agreement. This includes:

• Paying any outstanding rent or early termination fees
• Forfeit your tenant security deposit
• Repairing any damages beyond normal wear and tear
• Removing all your belongings and equipment
• Cleaning the premises thoroughly
• Returning keys and access cards

Step 8: Conduct a Final Inspection

Schedule a final inspection of the property with your landlord or property manager. During this inspection, document the condition of the premises, take photos, and note any issues or repairs that need to be addressed. This helps ensure that you won’t be held responsible for any damage that occurs after you vacate the property.

Step 9: Obtain a Release of Liability

After fulfilling your obligations and completing the final inspection, request a release of liability from your landlord. This document confirms that you have met all the requirements for terminating your lease and that you are no longer responsible for future rent or obligations related to the property.

Step 10: Plan Your Move and Notify Stakeholders

Once your lease termination is finalized, plan your move to your new location. Notify your employees, clients, suppliers, and other stakeholders of your upcoming relocation. Update your business address, contact information, and any legal documents to reflect your new location.

Lease Termination Summarized 

Terminating a commercial lease can be a complex process, but by following these ten steps, you can ensure a smooth exit and maintain a positive relationship with your landlord. Remember to review your lease agreement and communicate effectively — properly terminating your lease is crucial for maintaining a positive standing as a business.