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Lease Termination Agreements and Why You Need One - End of (in)Line

When a lease term ends, whether by expiration, default, or mutual agreement, the tenant is obviously expected to vacate the premises. Commercial leases will almost always contain language regarding the condition in which the premises must be returned to the landlord. For example, the lease may require that the premises be left in substantially the same condition that existed at the commencement of the lease, in good working order and repair, or in broom-clean condition.

However, the lease may not specifically address key terms such as the return of a security deposit, removal of tenant-financed alterations, payment of remaining charges, or liability for any damages caused to the property. Depending on the robustness of the lease, where some of these questions are left unanswered, a lease termination agreement is recommended.

The goal of a lease termination agreement is to provide definitive resolution of all open issues. Lease termination agreements typically include:

  • If prior to the expiration of the lease term, any compensation paid to landlord in exchange for early termination;

  • Establishment of the date when obligations under the lease will cease and the lease will terminate;

  • Establishment of the date tenant will surrender the premises;

  • The parties' termination responsibilities, such as cancellation of utilities, cleaning of space, and removal of alterations, antennas, advertising, or signage;

  • Itemization of any termination fees;

  • Itemization of any unpaid charges, such as prorated rent, maintenance fees, taxes, or utilities (the latter two of which are not usually billed on a monthly basis);

  • Conditions to the return of tenant's security deposit;

  • Provisions for showing the premises to possible tenants prior to the end of the lease term;

  • A mutual release of liability; and

  • A process for landlord to assess any damages that may occur during move out (which will typically be deducted from the security deposit).

Depending on the parties' relationship at termination, one or both parties may also wish to include confidentiality and non-disparagement provisions. Such provisions will protect the landlord from disclosure of confidential lease terms to other potential tenants and protect the tenant from any negative comments by the landlord to others.

Drafted correctly, a lease termination agreement helps the landlord and tenant avoid later misunderstandings or disputes. It provides the parties with peace of mind that their relationship is concluded and that they will not have to revisit old issues months or even years after going their separate ways.

©2020 von Briesen & Roper, s.c


About this Author

Chris A. Jenny, von Briesen Roper Law Firm, Madison, Corporate, Real Estate and Family Estate Law Attorney

Chris A. Jenny is a Shareholder in the Madison office of von Briesen & Roper, s.c. He focuses his practice on representing business owners in a wide variety of niche markets to become more profitable while minimizing their risk and expenses. Chris’s practice has a heavy concentration in the real estate, construction, and information technology industries. This practical experience is a tremendous benefit to the contractors, suppliers, landlords, tenants and real estate developers he represents. Chris’s construction...

William West, von Briesen Roper Law Firm, Milwaukee, Corporate and Real Estate Law Attorney

Bill West is a Shareholder. He Chairs the Firm’s Business Section and the Firm’s Mergers & Acquisitions Section.

Bill is a trusted advisor to his clients and they rely on his ability to achieve desired outcomes in a practical, timely and cost-effective manner – in other words, he gets things done. He has over 30 years of experience in corporate and business related transactions including:

  • Mergers and acquisitions

  • Complex corporate and commercial transactions

  • Corporate governance and business counseling

  • Business formation, strategy and structure

  • Business succession planning

  • Commercial real estate

Bill’s clients are involved in a range of industries, and include public and privately held businesses engaged in a wide variety of domestic and international transactions including asset and equity acquisitions, mergers, reorganizations, divestitures and restructurings.

Bill is also co-chair of the firm’s Retail Real Estate section. He represents clients nationwide in the purchase and sale of commercial real estate. Bill has a national practice handling the retail real estate leasing needs of both tenants and landlords.

Bill is a member of the American Bar Association (member of the Business Law, Real Estate and Taxation sections), and the State Bar of Wisconsin. He is also a co-author of LLCs and LLPs: A Wisconsin Handbook, 1st, 2nd and 3rd Editions, published by the State Bar of Wisconsin.

Bill is recognized by The Best Lawyers in America® as “Lawyer of the Year” for Closely Held Companies and Family Businesses Law in Milwaukee (2017). He is listed in The Best Lawyers in America® for Business Organizations (including LLCs and Partnerships) (2015-2018) as well as Closely Held Companies and Family Businesses Law (2014-2018).

Bill served as Chair and a member of the Board of Directors of Catholic Memorial High School.