How to negotiate your lease termination fairly and harmoniously

Whether you are a landlord or a tenant, lease agreements have an influence on what you may or may not do regarding the property you either own or live in. At some point, one or other party will want to terminate the lease agreement. If you’re the tenant, you may be ready to buy a property of your own. If you’re the landlord, circumstances may arise where you need to sell the property, or live in it yourself. There may be a rental dispute which causes the relationship between landlord and tenant to break down and you decide to terminate the agreement.

Lease agreements usually bind the parties to the terms and conditions of the agreement until the lease expiry date. How can you approach the situation to achieve a successful termination that is mutually acceptable, allows flexibility, and saves the time and money associated with formal legal processes?

Here are some tips to help you achieve a favourable outcome.

Know your lease terms

Before you approach the other party, familiarise yourself with what your lease agreement says and understand what your rights and obligations are. Look for any clauses that specifically deal with the termination of the lease agreement. These clauses may have conditions that will first need to be met and can cover a variety of considerations such as cancellation penalties or notice periods.

Check the market-related rent as well as vacancy rates in your area. If these are in your favour, let the other party know.

Communicate your needs

When you are clear on your contractual obligations and rights, contact the other party and communicate why you would like to terminate the lease agreement. Explain your reasons and see if the other party is willing to accommodate your situation. Avoid making demands or threats. Be honest and respectful. If the other party doesn't fully understand why you want to terminate the lease agreement, they may become defensive. Explain the benefits of reaching a mutually agreeable solution, such as avoiding legal disputes and maintaining a good relationship.

Explore your options

Depending on what your lease agreement says and how the other party responds to your request to terminate the lease, you may have different options as you negotiate the termination. Your options may include:

Early termination with a cancellation penalty
Termination with no penalties
Early termination and the obligation to secure alternative tenants
Transfer of lease rights and obligations to another tenant (assignment)
Rental of part of or the entire property to another tenant (subleasing)

Negotiate the best deal

Once you have discussed the options with the other party, try to negotiate a solution that will be beneficial to you both. Don't delay discussions; resolve the issue as soon as possible before tensions arise. Be mindful of notice periods and ensure you comply with everything required of you to prevent any unnecessary challenges that may accompany the termination negotiations.

How do I know what the best deal is?

Compare the costs and benefits of your desired approach and determine which option will be the most attractive and affordable to both parties. Assess the risks and liabilities attached to each option as well as any possible contingencies or guarantees that may be necessary to protect you or the other party from future problems or disputes. A good rule of thumb is to ask yourself whether the desired route is clear, fair, enforceable and consistent with both your lease agreement and any applicable laws or regulations.

Finalise the agreement

Once you and the other party have reached agreement, confirm it in writing. You should both sign a formal agreement reflecting the terms and conditions. To be safe, consult a lawyer and ask them to advise on whether the intended approach is legally sound. The lawyer can also assist in drafting the formal agreement and ensure all the details of your solution are properly addressed.

Once finalised, you must then comply with your obligations and follow through with the agreement.

Lease termination can be amicable