Cancellation of lease agreement template

There are plenty of reasons why a lease might come to an early end, whether that's a failure to pay the rent, or because the landlord and tenant have mutually agreed to ditch their initial arrangement.

Either way, you'll want to formalize the end of the lease, just like you did when you first initiated it. That's where a cancellation of lease agreement comes into play.

What is a lease cancellation agreement?

A lease cancellation agreement is a legal document that formally ends a lease contract before its original expiration date. It outlines the terms and conditions under which both the landlord and tenant agree to terminate the lease early.

Also known as a lease termination agreement, this real estate contract seeks to make the process of leaving a tenancy as stress-free and painless as possible. But it can only do that when both parties know what the agreement should include, and when it can be used. So let's explore that now.

What is the purpose of a cancellation of lease agreement?

The primary purpose of a cancellation of lease agreement is to provide a structured and legal framework for ending a lease. By formalizing the end of the lease, both the landlord and the tenant can rest assured that they've been relieved of their duties under the existing lease agreement. They can also clean up any details regarding financial settlements, including outstanding rent, security deposits, and other obligations.

Who manages cancellation of lease agreements?

Cancellation of lease agreements are usually managed by various parties, including landlords or property managers, who are responsible for initiating the contract termination process and ensuring compliance with the terms of the original lease in the process.

Tenants will also get a say. If they wish to cancel the lease, tenants must agree to the terms of the cancellation and fulfil any contractual obligations outlined in the cancellation of lease agreement, or exercise any rights they have under the original.

Depending on the complexity of the situation and the willingness of the parties to agree cancellation terms, lawyers or attorneys may also get involved.

When will a lease agreement typically be cancelled?

A lease agreement may be cancelled for various reasons, often based on the needs of either the tenant or the landlord. Some common scenarios when a lease agreement is typically cancelled include:

• ‍Mutual agreement: Both the tenant and landlord agree to end the lease early, perhaps because the tenant needs to relocate or the landlord wants to sell or renovate the property. For example, this might happen if a tenant is offered a job in another city and both parties agree to terminate the lease early without penalties.‍
• Tenant relocation: The tenant might need to move for work, personal reasons, or family obligations, so they have requested for the lease to be cancelled ahead of schedule to accommodate this move. According to the National Apartment Association (NAA), approximately 24% of tenants cite job relocations as the reason for early lease termination.‍
• Financial hardship: The tenant may face financial difficulties, such as a redundancy or a decrease in income, and can no longer afford the rent. In this instance, you might see the tenant negotiate an early lease termination with the landlord to avoid accumulating unpaid rent.‍
• Property damage or habitability issues: If the rental property becomes uninhabitable due to issues like severe damage, health risks, or natural disasters, the lease may be terminated early. This might happen if a flood severely damages the rental unit, making it unsafe to live in, and the tenant and landlord agree to terminate the lease.

Each of these scenarios demonstrates how specific circumstances may lead to the early termination of a lease agreement, typically through mutual agreement or due to breach of contract.

What should a cancellation of lease agreement template include?

• ‍Title of the agreement: A clear title such as "Cancellation of Lease Agreement" or "Early Lease Termination Agreement."‍
• Party details: Full names and contact information of both the landlord and tenant(s) involved in the agreement.‍
• Property details: The full address and description of the leased property being terminated.‍
• Original lease reference: A reference to the original lease agreement, including the date it was signed and its expiration date.‍
• Termination date: The agreed-upon date on which the lease will officially terminate, after which the tenant must vacate the premises.‍
• Reason for termination: A brief statement of the reason for the lease termination, if applicable, such as mutual consent, relocation, or breach of contract.‍
• Financial terms: Any financial obligations related to the termination, such as outstanding rent payments or prorated rent through the termination date, or early termination fees (if applicable).‍
• Property condition and handover: Terms regarding the condition of the property when the tenant vacates, including cleaning or repair expectations.‍
• Mutual release of liability: A clause releasing both parties from future claims or liabilities related to the lease, effective from the termination date, assuming all conditions are met.‍
• Governing law: A clause specifying the state or jurisdiction whose laws govern the agreement, and a reference to the laws where possible and relevant.‍
• Signatures: Spaces for both the landlord and tenant(s) to sign and date the agreement, affirming their acceptance of the terms.‍
• Witness or notary (optional): Some agreements may include a space for a witness or notary, depending on local laws or the preferences of the parties involved.

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Why are lease agreements difficult to cancel?

The biggest challenge when cancelling a lease agreement is getting both parties (the landlord and tenant) on board. After all, they will have both signed the original lease with the intention of maintaining it for that time, and they might even have relied on it.

Take the example of a landlord seeking to sell their property, for example. Even when the landlord gives sufficient (and legally prescribed) notice, it can still leave the tenant struggling for alternative arrangements, which creates friction in the termination process.

On the flip side, a tenant that wants to be released from a tenancy because they need to move out of the area, or can no longer afford to pay rent due to a redundancy, may put financial strain on the landlord who relied on the income from that property.

The best way to minimize this friction is to refer back to the original contract and understand what cancellation reasons and routes were approved in advance. This will pave the way for more mutual and respectful conversations.

How to manage cancellation of lease agreements

1. Review the original lease agreement

If you're the landlord or tenant looking to break free from a lease, you should begin by carefully reviewing the terms of the original lease agreement. Most leases include provisions for early termination, such as:

• Notice period: How much advance notice either party must give before terminating the lease.
• Penalties or fees: Details on any early termination penalties, such as a forfeited security deposit, specific fees, or additional rent payments.
• Subletting clauses: Some leases allow for subletting, which may provide an alternative to outright termination.
• Exceptions: Look for any clauses that might allow for termination under certain conditions, such as military deployment, health issues, or property damage making the unit uninhabitable.

If drafted properly, the original lease should also detail the legal responsibilities of both parties, such as obligations to mitigate damages, return security deposits, or ensure the tenant vacates the property in good condition.

These terms are crucial to understanding your legal position, and your right to proceed with a lease termination. You may even want to seek advice from a legal professional at this stage to confirm these assumptions.

2. Initiate communication

Next, you need to communicate your intention to end the lease early. This can be a formal written request, phone call, or in-person meeting, and the conversation can be initiated by either party to the contract.

During these conversations, both parties should discuss the terms of the lease cancellation, including the termination date, financial obligations, and property handover conditions. Flexibility and clear communication are key during this phase, particularly if you want to protect your long-term relationship.

This is also an opportunity to negotiate new terms to amend your existing lease agreement, if that would solve the issue resulting in the cancellation. For example, a landlord may be willing to slightly drop your rent, or allow you to renew the lease at a more favourable price.

3. Draft the cancellation of lease agreement

Once you've reached an agreement on the decision to terminate the lease, you can begin to draft the cancellation of lease agreement. This can be done based on the existing agreement, or using a pre-approved contract template.

Depending on the complexity of the situation, either party may seek legal advice to review the agreement before signing. They might even ask a lawyer to draft it in the first place.

4. Sign the agreement

Once the terms have been reviewed, negotiated, and approved, the landlord and tenant must sign and date the lease cancellation agreement to make it legally binding. This can be done using an electronic signature, or a physical signature.

You should also ensure both the tenant and landlord have copies of the signed agreement for their records.

5. Fulfil your obligations

Exiting the lease won't make your obligations disappear. The tenant must pay any prorated rent, penalties, or unpaid fees as agreed in the cancellation agreement, and the landlord must inspect the property, account for any damage or cleaning fees, and return the remaining security deposit within the timeframe required by law.

The tenant also needs to return the keys, access cards, and the property to the landlord as promised.

Make real estate contracting simple with Juro

Juro can streamline and automate the management of real estate contracts for landlords by offering a comprehensive, AI-native platform that simplifies contract workflows, enhances collaboration, and provides valuable insights.

Here’s how Juro can be used to manage real estate contracts for landlords:

1. Streamlined contract creation and drafting

• Automated contract templates: Juro allows landlords to create automated contract templates for lease agreements, rental agreements, and addendums. These templates can be pre-populated with key terms and variables such as rental amount, lease duration, and property details, minimizing manual input and reducing errors.
• AI-powered drafting: Juro’s AI capabilities can help landlords quickly draft new contracts by using pre-defined clauses and making intelligent suggestions based on contract type, ensuring compliance with legal requirements.
• Customizable fields: Fields such as tenant names, rent amounts, and lease start/end dates can be auto-populated based on the information already in a CRM, making contract creation faster and less error-prone.

2. Collaborative negotiation process

• Browser-native workspace: Juro’s collaborative platform allows both landlords and tenants to review, comment on, and negotiate contracts in real-time within the same workspace, eliminating the need for back-and-forth emails and multiple versions of a document.
• Track changes and comments: Tenants and landlords can make suggestions or request changes directly in the contract. All changes are tracked in real-time, ensuring transparency and speeding up the negotiation process.
• Electronic signatures: Once both parties agree on the terms, Juro’s built-in eSignature functionality allows the contract to be signed instantly within the platform, removing the need for third-party signature tools and reducing delays.

3. Opportunities to automate routine admin

• Automated approval workflows: Juro can automate approval processes for lease contracts, ensuring that any internal reviews, approvals, or legal checks are automatically routed to the right individuals. For example, if a new tenant agreement needs review by a legal team, it’s automatically assigned for approval, with notifications to keep everyone on track.
• Conditional workflows: If a specific condition is met (e.g., tenant requests a shorter lease period), the system can automatically trigger different workflows, such as notifying the legal team to update contract terms or flagging a particular clause for approval.
• Reminders and task automation: Juro’s platform sends automated reminders for key contract milestones, such as lease renewals or rent escalation clauses, helping landlords manage their properties more effectively without missing deadlines.

4. Centralized contract repository

• Single source of truth: Juro offers a secure, centralized repository where all contracts are stored digitally. This ensures that landlords have easy access to all lease agreements, addendums, termination notices, and other legal documents in one place, reducing the risk of lost or misplaced documents.
• Searchable repository: The platform’s powerful search functionality allows landlords to quickly locate specific contracts or clauses. For example, if a landlord needs to find all leases with a specific rent escalation clause, they can easily search and filter contracts based on predefined criteria.
• Real-time updates: Juro’s dynamic repository ensures that any updates made to the contracts are instantly reflected, keeping all versions and records up to date without manual version control.

By using Juro, landlords can automate the entire lifecycle of real estate contracts, from creation and negotiation to execution and storage.

Juro’s platform reduces administrative burdens, enhances collaboration with tenants and property managers, ensures legal compliance, and provides valuable insights for managing multiple properties efficiently.

With automated workflows, contract tracking, and a centralized repository, Juro helps landlords stay organized, meet deadlines, and focus on scaling their portfolios without the hassle of manual contract management.

If that sounds like something you'd benefit from, fill in the form below for a personalized demo of Juro.