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Early Lease Termination Clauses

Early Lease Termination Clauses

There are two different schools of thought regarding early lease termination clauses. Some landlords hold that they don’t want an early termination clause in their lease because it makes the tenant feel that that it is okay to terminate early. Others feel that it is better to have the terms of the early termination laid out ahead of time. We fall into that second camp. Here’s why:

1. Courts like to have language to look at it rather than having to make on the spot judgment calls. If a judge can look at a specific clause in a lease that is very clear about what is required to terminate a lease early, then they are much happier about that as compared to trying to determine their own remedy.

2. The absence of an early termination clause leads tenants to believe that they can negotiate this after-the-fact rather than meeting the landlord’s demands.

3. If you don’t have a written agreement about what the penalty is for an early termination, then many courts won’t allow you to collect one. The concept of “liquidated damages” is basically that you can pre-agree on what a fair estimate of your damages would be in the event of an early termination, so that any early termination fees charged are not viewed as a penalty, but rather as reimbursing you for your direct harm. This is important in most courts, where judges will not allow penalties, but will allow liquidated damages if pre-agreed.

We think it’s quite important to have this item agreed upon in advance as part of the lease agreement. To address the concern of those landlords who feel it gives the tenant a green light to terminate early, our solution is to make the liquidated damages a sufficient amount that would discourage early termination. After all, if you have to re-rent the property, it is likely that you will suffer damages from lost rent for a period of time, costs of advertising, lost time in showing the property, etc.

Give us a call and we can take care of all of this for you with our professionally written and constantly updated lease agreements. Then you can just sit back and collect your monthly rent check.