How To Understand Early Release Clause in a Lease Agreement

Real properties given on lease, whether for commercial purposes or for residential usage, have a few requirements in common for both the owner and the tenant, and those are: assurance of the tenure of lease, timely payment of lease fees or rental amount, safe custody and enjoyment of the leased property.

To this end, parties try committing both parties into agreeing to what are called water-tight clauses and secure respective interests. But, what happens if either party wants to terminate a lease arrangement ahead of its time. Here's how to structure an early release clause in a lease agreement.

The lease agreement is normally for a fixed period of time, with an option for renewal for additional periods of equal or more tenure. Sometimes, parties insist on stating a certain period of time initially as the lock-in period. During this time, neither party is allowed to terminate the lease arrangement, and if forced to do so, then the terminating party will compensate the other party to the extent of costs, expenses and damages suffered by them due to the premature termination.

Whether or not there is a lock-in period mentioned in your lease, it is best advised to carve out an early release clause in your lease agreement. 

It may suit the terminating party's interest if no particular reason is mentioned in the early release clause. However, in the interest of transparency between the parties, it is beneficial to state that the parties may be released from obligations under the lease upon the occurrence of a number of predetermined reasons - for example, these reasons could be transfer in your office location in case you are an employee and prone to transfers within your organization; change of jobs; reduction in your income; change in marital status and so on. In some states, defense personnel are permitted to early release from lease commitments if their military service requires a change in location.  

Other reasons for an early release would be if the premises become unfit for occupation such as - water leakage, occurrence of fire, mildew formation, cracks in the walls, premature peeling of paint, faulty water, electrical, heating and air-conditioning systems. To enforce this release clause, it is mandatory that you have included clauses to the effect that the owner will maintain and keep maintained the leased premises in good order and condition. Of course, minor repairs are always the tenant's responsibility. Note that at the time of taking possession of the premises you should ensure that the leased premises are clean, painted, polished and in good condition. Of course, it is possible to enforce repairs or early release in such circumstances, even if it is not specified in the lease agreement, but may entail legal proceedings, which could add additional cost.

A more expensive form of avoiding costs and expenses for early termination would be to opt for a month-to-month rental arrangement. However, in such instance, the owners tend to take higher security deposits, and you could run the risk of periodic increases in rent amounts depending upon changes in the market rates.

Whatever be your preference, it is a really good idea to have at least one of the above-mentioned options included in your lease agreement for an early release - just in case a need may arise.


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