Discharge of Lease Agreement Basics

A release of lease agreement is a real estate document that provides that all parties obligated under a lease, including the tenant and guarantors of the lease, are released from the lease obligations. The Release also releases the landlord from any further obligations to the parties. In most cases, the Landlord’s obligations to the Tenant are satisfied by returning the full security deposit to the Tenant at the end of the term.
The Release is an important document because if a tenant who signed the lease other than in a corporate capacity ("Tenant") signs the lease, then the Tenant may have individually guaranteed the lease . When the lease is signed by a corporate entity alone, then the guarantor, who is usually an officer or director of the corporate entity, is liable to the Landlord to the extent of the guaranty.
In order to avoid a later claim by the Landlord against the Tenant and/or the Guarantor, a release is recommended. In addition, the Tenant will want a full release so that he/she will not be liable during the time period the Tenant actually occupied the space, but did not sign a lease, or where the Landlord pays for the Tenant to terminate the Lease early. Even if the Tenant does not want a release, the Landlord will want one.

Key Components of a Discharge of Lease Agreement

The release of lease agreement must contain the following elements:

• Identification of the Parties – It is crucial to identify by their names the parties to the lease that are rescinding the lease. The best practice is to set forth the date of the original lease, the name of the lessee and the name of the lessor.
• Description of the Property or Properties – It is best practice to provide for the legal description of the real property or properties that are subject to the rescission. If the real property is represented by tax parcels, it is best to list the tax map numbers.
• Terms of the Rescind – The parties to the rescission must accurately describe the terms that are being mutually rescinded, as well as confirming the fact that the lessor will return the keys to the lessee for the property.
• Indemnification – The parties to the rescission should stipulate that any prior claims by either party against the other party are rescinded, including but not limited to all claims by a party against its directors, officers, employees, agents, successors and assigns. The parties should also see to it that the covenant not to sue is also included in the release.

Preparation of a Discharge of Lease Agreement

The first step in drafting a release of lease is to review the lease agreement in detail. Ensure you fully understand the current terms and obligations set forth in the agreement. For example, determine whether any extensions to the agreement were made by either the landlord or tenant. The next step is to review the terms of the lease in order to draft an appropriate release of lease. During this review of the lease you will need to determine the obligations of both the landlord and tenant and then address how each will be addressed in the release of lease agreement. For example, are there any items or repairs to be made by the landlord which you should address in the release of lease document? Are there any items to be returned to the landlord upon term of lease or security deposits to be refunded to the tenant? Are there any items to be returned to the tenant or obligations to be made by the tenant which should be addressed in the release of lease? As stated above, the release of lease should be drafted in the best interest of both parties. In other words, the lease agreement should be mutually beneficial to both the landlord and tenant. Be sure to address in the release of lease that both the landlord and tenant have mutual obligations to the other which should be addressed in the document. Below is an example release of lease that can be used for the above examples or referenced when drafting your own: RELEASE OF LEASE AS BETWEEN: TENANT NAME and Tenant Address (the "Tenant") -AND- LANDLORD NAME and Landlord Address (the "Landlord") WHEREAS: A. The Landlord is the tenant under a lease agreement dated February _, 20XX (the "Leases") between Tenant and Landlord(collectively, the "Parties"). B. The Parties have mutually agreed to terminate the Leases such that the Parties shall have no further obligations to each other under the Leases. THE PARTIES HEREBY AGREE AS FOLLOWS: 1. Each Party hereby waives and releases the other from any obligations or other claims for damages, in any jurisdiction, as of the date set forth below in relation to the Leases. 2. This Release is given in consideration of the performance of all agreements set forth in the Leases, and as a fully mutual release. 3. This Release of Lease agreement inures to the benefit of and may be enforced by the Parties hereto, each of their respective successors and Assigns and is binding upon the parties hereto and each of their respective successors and Assigns. GOOD AND VALUABLE CONSIDERATION having been exchanged, the Parties hereto agree to this Release of Lease on this ___ day of ____________, 20XX. RELEASE OF LEASE __________________________________ LANDLORD NAME By: ______________________________ Name: ______________________________ Title: _______________________________ Tenant Ex: _____________________________________ TENANT NAME By: ______________________________ Name: ______________________________ Title: ___________________ By signing this Release of Lease, Tenant acknowledges and agrees that he/she has made all repairs to the Premises and re-painted the Premises in accordance with his/her obligations under the Leases.

Blank Discharge of Lease Agreement Template

The Parties agree that upon the date of this Agreement, the Landlord and Tenant are released from their respective obligations, both known and unknown, under the Lease, and they shall have no further obligations arising out of, or in any way relating to the Lease.

1. The Tenant shall be released from all obligations of the Lease whether or not they then are known or suspected.
2. The release shall include, but shall not be limited to, any obligations of the Tenant concerning: rent, repair, maintenance, liability, indemnification, environmental compliance, and compliance with applicable federal, state and municipal laws.

Tenant agrees that they will further absolutely and finally release and forever discharge the Landlord, its affiliates, employees, agents, successors, assigns, partners, members, managers, officers, directors and shareholders from any and all rights, claims, actions and demands, and liabilities of whatever kind or nature whatsoever, in law, equity or otherwise that they might otherwise have against the Landlord and their affiliates, employees, agents, successors, assigns, partners, members, managers, officers, directors and shareholders as a direct or indirect result of the Lease, at law, in equity, and otherwise .
Tenant waives any and all claims arising out of or relating to the Lease including but not limited to:
(A) the ability or inability of Tenant to obtain financing or a loan commitment from any lender, without regard to whether the Loan is secured by Mortgage or not, or at any time put any documents of any kind or description into the hands of any lender, all as related to the Leases.
(B) any mechanic’s, materialman’s, construction or other lien whatsoever with respect to the Leases.
(C) the right to maintain any action in law or in equity against the Landlord for any nuisance, taking, expropriation, fee simple, conservation easement, die-in-fee easement, mortgage, expropriation, condemnation, lien, tax, assessment or encumbrance action whatsoever.
Tenant agrees that upon request of the Landlord, it will hereby specifically waive any right to bring any claim against the Landlord with respect to the Lease.
If Tenant has entered into one or more sublease(s) and/or assign(s) under the Lease, the Tenant acknowledges and agrees that the release contained in this agreement includes, but is not limited to, the Landlord’s release of all obligations under the Lease with respect to any and all such sublease(s) and/or assign(s).
This release shall be binding upon and inure to the benefit of the parties and their heirs, successors and assigns.

Legal Issues and Common Errors

Many common mistakes stem from landlords and tenants unaware of a few important legal considerations about the release process. First, a lease, like any contract, is subject to contract law and fundamental principles of equity. This means that, in some cases, landlords and tenants can contract around the typical rules with knowledge and mutual consent. However, it also means that there are some issues that simply cannot be avoided.
For example, both parties must be capable of entering into a contract. A lease to minors and an agreement entered into by someone who is intoxicated, mentally unstable, or has a guardian, are all unenforceable. A landlord may not lease a property without a required license. The release agreement must be in writing and signed if it alters the existing agreement in any way. If the agreement is to be enforceable, the parties must intend that their agreement is a legal contract (as opposed to "mere puffing" or similar informal pre-agreement negotiations).
If the release agreement has replaced the original, a court may consider a number of factors before concluding that the first is no longer enforceable. These factors include: 1.) whether a material portion of the consideration exchanged was for a release; 2.) the relationship between the parties; and 3.) the surrounding circumstances.
Landlord and tenant groups are under no obligation to release a security deposit when a lease is released. Even if a lease ended as a result of a mutual release, the parties are still responsible for their obligations if they were aware of the condition of the property at the time of the release.

Leasing Rights and Responsibilities

Moving Forward – Once a Release of Lease Agreement is Signed and Delivered
Both the landlord and tenant have certain rights and responsibilities once an Agreement of Release of Lease is signed by both parties.
A. Tenant’s Responsibilities after Signing the Release of Lease: Once a tenant signs the Release of Lease, the tenancy is over. The tenant is responsible for the full rent until he or she returns the premises to the landlord in a broom-clean condition. The tenant may retrieve his or her security deposit and/or the tenant can request that his or her security deposit be returned to the tenant when the Real Property’s Rent Escrow Repair List is properly satisfied and met by the landlord as agreed. The tenant remains responsible to the landlord for all of the tenant’s remaining responsibilities under the lease terms and terms of the Release of Lease.
B. Landlord’s Responsibilities after Signing the Release of Lease: Once the landlord signs a Release of Lease, the Real Property Landlord has the burden of returning the security deposit to the tenant or allowing the tenant to pick up the security deposit . Any amount of the tenant’s remaining lease obligations that the security deposit is intended to cover can be offset by the security deposit, but the Landlord is not legally permitted to keep beyond its entitlement. The landlord remains responsible to the tenant for all of the landlord’s remaining responsibilities under the lease terms and terms of the Release of Lease.
Customarily, however, the landlord and tenant will negotiate an amount of the security deposit to be released to the tenant and an amount of the security deposit being paid back to the landlord. There are legally allowable reasons why a landlord can use a tenant’s security deposit, after satisfying any unpaid rent or arrears with the security deposit. The tenant’s remaining lease obligations may exceed the amount of the tenant’s security deposit.
C. Liability for the Landlord and Tenant after Release of Lease: Once the Release is executed, if the tenant desires to move out and the tenant moves out before the end of the term of lease for this Real Property, the tenant must vacate the premises by the end of the day that the tenant has given the landlord any required written notice that the tenant is terminating the lease, or 30 days after the notice of termination was given to the landlord.