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How To Pre-terminate A Lease Contract Without Getting Sued

Of all business contracts that see the most instances of pre-termination cases, the lease contract is probably the most common. Other contracts that often get pre-terminated are post paid plans, car rental plans, employment, and deed of sale or transfer contracts.

Keeping the topic limited to leasing contracts, there are many things a person can lease: apartments, equipment, houses, lots, even country club shares. In fact, according to the American Bar Association (ABA), 8 of 10 businesses in the United States are engaged in leasing. ABA advices anyone interested in entering a lease contract to make sure of the following:

Know the item to be leased including maintenance, taxes, fees to be paid, use, and all its specifics.

Know your lessor or landlord in terms of dependability, trustworthiness, years in the business, knowledge, compliance with federal and local laws, availability, and credentials.

Your capacity to follow the terms of the lease contract

Unfortunately, there are dozens of cases when a pre-termination of a lease contract is necessary. There are a few legal reasons for a pre-termination and being angry with one party is not one of them. Basically, the easiest way to pre-term a contract is when one or more of the contract terms are not being followed. If a lawyer can easily prove this, the procedure would be swift, not expensive to pursue, and with favorable results for the injured party. Other reasons are:

When there is misrepresentation or fraud; also known as rescission

When the contract cannot be fulfilled; also known as “impossibility of performance” such as death of one party

When one party is not eligible to sign a contract due to age or mental incapacity

When there is serious or material breach of contract such as non-delivery or non-payment

When both parties agree to end the contract pre-maturely

If your situation does not fall under these scenarios, then you might be in for a long legal battle. That is, unless you get legal advice immediately. The main advantage of having expert legal advice from the start of your pre-termination negotiations is that you avoid making mistakes and giving the other party reason to stall or deny your request. A lawyer will also be able to guarantee that the pre-terminated agreement will not come back to haunt you legally. In short, with a lawyer, you can enjoy a “clean break.”

Another common reason for a pre-termination not mentioned above is when your ability to honor your part of the agreement, through no fault of yours, occurs. For instance, the economy suffers an unexpected downturn that affects your business or an act of God, an accident, or serious medical situation.

Steps to Pre-Terminating Your Lease Contract

Go over your lease contract. Note the terms on pre-termination and the consequences such as loss of security deposit and any unpaid, received or not yet received, bills.

Consult a lawyer about your options.

Work on an amicable agreement and be ready to forfeit deposits and pay any unsettled bills.

Inform the other party in writing of your intent. Hopefully, you consult with a lawyer about your letter before having the letter sent and received by the other party.

Avoid aggravating the situation by being negative towards the other party. Take into consideration that it is highly possible you took that person by surprise and some adjustments by that person will have to be made.

Any agreement to pre-terminate must be signed by both parties and notarized.

Certain Don’ts about Pre-termination

A contract is a binding legal document that has the potential to turn your life upside-down especially if you decide to just walk away from your obligations. Thus, the very first rule to pre-termination is to never walk away. If you don’t like the other party, hire a lawyer to handle the details for you. Running away will never solve the problem and could damage your credit and cause you months of unnecessary litigation.

Don’t demand quick action. You will have to give enough time for the other party to consider your request and consult with a lawyer. However, you can and should appeal for understanding and request for leniency. It is possible for the other party to demand all or a portion of the obligations be met such as payment or partial payment until a replacement client can be found.

Don’t assume “it’s in the bag” if the lease contract has nothing about pre-termination because in cases like this the law on rescission applies, meaning if the contract does not have specific clause on pre-termination, then the state laws will come into play. In most states, there is such a thing as a “rescission period” wherein certain contracts can be cancelled up to 10 days from signing the contract. Generally though, most lease contracts have a pre-term clause with specifics on how it is to be applied such as number of days notice and penalties.

Finally, never assume anything. Hire a lawyer to ensure you get it done right the first time thereby saving you time, money, and giving you finality as far as this particular lease contract is concerned.

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