Lease Termination: Complete Guide

The lease termination is a process that often raises many questions for both landlords and tenants. For this reason, in this article, we've compiled all the necessary information to help you navigate this process smoothly.

What is lease termination?

When we talk about lease termination we are referring to ending it early. In this process, there are several procedures involved to protect both tenants and landlords. 

Reasons for Lease Termination

Several factors can lead to the termination of a rental agreement. Examples include breaches of contract, personal needs, and even when both parties agree it's the best course of action. Let's take a look.

Valid Personal Reasons

When a tenant needs to terminate the lease agreement due to health issues, family conflicts, relocating for work, etc., they can request the termination of the contract citing valid personal reasons.

Breach of Contractual Responsibilities

Every rental agreement establishes certain obligations for both parties, and these parties are responsible for fulfilling them while the contract is in effect. If either party defaults, the other can request termination.

Agreement Between Parties

In some cases, both the landlord and the tenant wish to terminate the contract (for common or individual reasons) and reach a mutual agreement. 

When this happens, both parties establish the terms of the termination of the agreement; that is, the end date, whether compensation is required for either party, if the security deposit is to be returned, etc.

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Who can request it?

Both the tenant and the landlord can request to terminate a rental agreement. However, there are conditions that apply depending on the applicant's role. Let's look at this in detail.

Tenant's Request for Termination

When the tenant has reached at least 6 months of the contract can make the request. Additionally, they are obligated to provide at least 30 days' notice. This is stipulated by the Urban Leases Act (LAU).

Landlord's request for termination 

When the landlord believes the tenant has seriously breached the terms of the contract, they can request its termination.

They can also request it if they require the property for family or even personal use. In this case, it's necessary to seek advice, as certain conditions must be met for the request to be valid. 

Mutual agreement for termination 

If both parties agree to terminate the contract, it is highly recommended that they document the agreement in writing. This helps avoid future legal disputes.

Legal requirements and deadlines

Although requesting the termination of a rental contract is not an overly complicated process, it is necessary to know which requirements and deadlines must be met. Take note of the following conditions.

• Minimum stay period. The contract must have been in effect for at least 6 months. Otherwise, a penalty may apply.
• Notice. The intention to cancel the contract or vacate the property must be given with at least 30 days' notice.
• Penalty Clause. Some contracts include clauses for penalties in the event of early termination. While these must be respected, it's advisable to consult a lawyer to ensure the clause is not abusive.

When either party decides to request termination, it must be done in writing on paper or digitally. If an email is sent, it must include a read receipt.

How to do it? Step-by-step 

Once you've decided to terminate your rental agreement, you need to follow a series of steps to avoid future problems. Let's take a look.

Contract Review

The first step is to review the conditions of the contract. You should identify any specific termination conditions, clauses, and potential penalties. 

Communicating Your Decision

The intention to terminate a rental agreement must always be communicated in writing. We recommend sending a letter or email to the landlord or tenant including details such as:

• The reasons for which the contract is to be terminated.
• The date planned for vacating the property.

Additionally, it is important to include any other information deemed relevant to the request or specified in the contract.

Agreeing on the termination conditions

If the contract includes clauses or potential penalties, you can negotiate them with the other party. 

Both parties must agree on when the property will be inspected to verify its condition upon handover, the return of keys, whether the security deposit will be refunded, etc.

Once all these conditions have been agreed upon, we recommend drafting a document outlining all of them. Both parties must sign it to acknowledge and agree.

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Rental Agreement Termination Letter Template

Do you need help drafting the letter for termination of the rental agreementYou can use the template we've provided below and customize it with your information.

Legal Advice Before Terminating a Rental Agreement

To avoid legal conflicts related to the termination of a rental agreement, certain aspects need to be considered. Here's a list of the most important ones.

Document the Entire Process

Once the decision to terminate the contract has been made, we recommend keeping all notification letters, receipts, and any other documents related to the rental in question.

Seek Specialized Advice

Many people encounter legal complications in this process that could have been avoided simply by seeking professional advice. 

If you believe the contract contains clauses that may be abusive or unclear, it's best to seek specialized legal advice from an attorney. 

Conduct an Inventory When Handing Over or Receiving the Property

It is advisable for both the landlord and the tenant to conduct an inventory of the items within the property at the time of handover. 

It should also be documented what belongings the tenant temporarily leaves behind if they cannot take everything at once.

And, in addition to putting everything in writing, we recommend to take a photographic record of all areas of the property. This ensures a clear record of the property's condition upon handover.

Consequences of Early Contract Termination

Terminating a contract early can lead to various consequences. Here are some of the most common.

• Loss of deposit. This may be partial or total.
• Financial penalty. Some contracts stipulate a financial penalty for such cases.

Additionally, there may be the loss of certain rights. Rights such as a lease extension or certain agreed-upon benefits may be lost if you try to terminate a rental contract early.

Questions (FAQs)

Still have questions? We encourage you to check out our FAQ list, as it includes the ones we receive most frequently.

Is a verbal notice valid for vacating the apartment?

Verbal notice is not valid to terminate the rental agreement. For it to be valid, it must be in writing.

What happens if the contract doesn't mention a penalty?

If the contract in question does not mention any penalty, then this cannot be enforced. 

Can I leave before 6 months if there's a force majeure event?

When it comes to serious illnesses, unexpected or urgent job transfers, among other force majeure events, yes, you can leave before 6 months. In this case, we recommend putting everything in writing.

Can the landlord evict me before the contract ends?

This may be possible when there is misuse of the property, repeated default on rent payments, or another significant legal reason. However, for this to happen, there must be a legal process involved.

What happens to the security deposit if I terminate the contract?

If everything is in order, you return the property in good condition, and you comply with everything agreed upon, the landlord must return the security deposit within 30 days after returning the keys.

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