Lease Termination Agreement

Rental Termination Agreement - A rental termination agreement is a mutual agreement between the landlord and tenant to end the existing tenancy at a specific date. Unlike a standard termination, there is no requirement to observe notice periods or provide reasons for termination-both parties voluntarily agree to the termination. Often, a settlement payment (relocation allowance) is paid by the landlord to the tenant in return.

Typical Reasons

The most common reasons for a lease termination agreement are: The landlord wants to vacate the apartment for personal use, renovation, or sale and wishes to avoid the lengthy termination process. The tenant wants to move out early (e.g., job change, moving in with a partner) and does not want to wait out the statutory notice period. Or both parties want to amicably resolve a disputed situation (e.g., rent arrears, property defects) rather than go to court.

A lease termination agreement is also frequently used when selling a rented property. Buyers who wish to use a property themselves typically pay significantly more than investors-a vacant apartment often increases the sale price by 15 to 30 percent. If the tenant is willing to move out in exchange for a severance payment, both the seller (higher proceeds) and the tenant (financial assistance with the move) benefit.

Severance Payment Amount and Negotiation

The amount of the severance payment is freely negotiable-there is no legal requirement. In practice, the severance payment is based on the rent differential between the current rent and the rent that can be achieved after re-leasing, the tenant’s moving costs, and the length of tenancy (long-term tenants have more bargaining power). Typical severance payments in major cities range from 3 to 15 months’ rent-depending on the situation and negotiating skills.

The economic logic from the landlord’s perspective: Someone who pays 10 months’ rent as severance and then raises the rent by 300 euros per month upon re-letting recoups their investment in just over 33 months. If the rent difference is even greater or the landlord intends to sell the property, the severance payment can be higher and still make economic sense. Tenants, for their part, should consider that an apartment at local market rates is hard to find in tight housing markets like Nuremberg-this disadvantage should be factored into the negotiation.

Legal Requirements and Key Provisions

A lease termination agreement must be in written form (Section 568 BGB by analogy), even though a purely verbal agreement would not be legally invalid-in practice, however, a written agreement is mandatory for evidentiary purposes. The agreement should address the following points:

• Exact move-out date and handover of keys
• Condition of the apartment upon return (cosmetic repairs, renovation obligations)
• Settlement of outstanding mutual claims (security deposit, outstanding utility bills, claims for defects)
• Amount and due date of the settlement (advance payment or payment upon move-out)
• Liability disclaimer clause for further claims by both parties

Practical Tip for Landlords in Nuremberg

We recommend that landlords in the Nuremberg metropolitan area always draft a lease termination agreement in writing and with legal counsel. Compare the severance payment to the costs of a termination for personal use (lawyer, court, waiting period)-in many cases, the termination agreement is more cost-effective and significantly faster.

In Nuremberg, we observe that tenants’ willingness to agree to a mutual termination depends heavily on market conditions. In neighborhoods with high rent levels and low vacancy rates-such as the Old Town, the Johannisviertel, or Gostenhof-tenants negotiate much more aggressively, as they know that an equivalent apartment with similar terms is hardly available. In less sought-after locations, agreements are reached more quickly. We support such negotiations discreetly and with a focus on results.

Frequently Asked Questions

Can the tenant withdraw after signing?

A signed lease termination agreement is generally binding-there is no statutory right of withdrawal. It can only be contested in cases of mistake, duress, or fraudulent misrepresentation. The tenant should therefore take sufficient time to consider the matter before signing and, if necessary, seek legal advice.

Will the tenant run into problems with the employment office if they move out early?

A lease termination agreement has no direct impact on benefits from the employment office. However, for recipients of basic income support, the question may arise as to whether the move was “necessary”-only then will the employment office cover the new housing costs. If in doubt, clarify this with the relevant office beforehand.

Is the severance payment taxable?

For the tenant, the severance payment is generally taxable as other income (Section 22 No. 3 of the Income Tax Act), provided it exceeds the tax-free allowance of 256 euros. For the landlord, the costs are deductible as income-related expenses from rental and leasing income if the termination serves to generate higher rental income.

What mistakes are commonly made in a lease termination agreement?

Typical mistakes include: failure to address cosmetic repair obligations, unclear due dates for the settlement payment, lack of a comprehensive mutual release of liability, and failure to address the settlement of utility costs for the period up to the move-out date. The question of whether the tenant pays the full rent or only a pro-rata amount until the move-out date must also be explicitly addressed. We recommend having the agreement reviewed by an attorney before signing.

Lease Termination Agreement in Cases of Termination for Personal Use: The Comparison

Landlords are often faced with a decision: termination for personal use or a lease termination agreement with a settlement? Termination for personal use is legally complex: It requires a serious, proven need for personal use, statutory notice periods of three to nine months depending on the lease term, and the risk of judicial review. In tight housing markets like Nuremberg, terminations for personal use often fail in court because tenants challenge the termination with counter-expert opinions and objections based on social hardship.

The lease termination agreement circumvents this litigation risk. It provides immediate legal certainty, avoids court costs and waiting periods, and enables an amicable transition that does not permanently strain the relationship between landlord and tenant. In the Nuremberg metropolitan region, where rental prices rose sharply between 2015 and 2024, the difference between the current existing rent and the achievable rent for a new lease is often significant-which makes the economic logic of a severance payment particularly attractive to landlords.

Can a lease termination agreement be part of the purchase agreement in the context of a real estate transaction?

Yes. It is common practice for a purchase agreement to be concluded subject to the condition precedent that a lease termination agreement is concluded with the tenant. Alternatively, the severance payment can be deducted from the purchase price in the purchase agreement so that the buyer bears the costs of vacating the premises directly. Such arrangements require careful drafting by a notary and should be handled by an attorney specializing in tenancy law.

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