Can a Lease Agreement Be Terminated Early?
The Estonian rental market is active and has very many different participants. There are professional landlords of residential and commercial spaces, but also many individuals who rent out apartments they own. Although the market generally works and everything goes smoothly, disagreements between parties arise from time to time, and a significant portion of these concern early termination of contracts, writes Karlis Kolk, lawyer at Uus Maa Real Estate Bureau.
In the following article, we explain the grounds on which rental agreements can or cannot be terminated early. The parties to a real estate rental agreement may conclude it in any form, but to avoid disputes regarding the existence of the contract or its essential terms, it is advisable to conclude it in written or written reproducible form (for example, so that it can be printed out if necessary). Among other things, as an important condition, it must be clearly determined whether the agreement is concluded for an indefinite or definite period, since this determines how the contract can be terminated.
What is what?
An indefinite agreement means that no specific duration period for the rental agreement is specified, and either party can terminate the agreement at a time that suits them by giving notice to the other party.
In the case of renting real estate, residential or commercial space, either party to an indefinite rental agreement may terminate it by giving notice to the other party at least three months in advance. In the case of renting furnished rooms, an indefinite rental agreement may be terminated by giving notice at least one month in advance. In both cases, care must be taken to ensure that the rental agreement termination notice is drawn up correctly and in accordance with the requirements set out in the law, otherwise the termination notice is void.
In the case of fixed-term agreements, the duration period of the rental agreement is specified (for example, 1 year). A fixed-term agreement cannot be terminated regularly, as an indefinite agreement would be, but rather it is expected that the agreement will remain in effect until the end of the contract period.
Of course, it is also possible in this case that the agreement is terminated early by mutual agreement of the parties, but then both parties must agree to it. If agreement cannot be reached and one party still wishes to terminate the contract before the agreed date, then the provisions on extraordinary termination of the rental agreement must be relied upon.
The reason must be compelling
A rental agreement may be terminated extraordinarily if there is a compelling reason for doing so. A reason is compelling if, when it occurs, the party wishing to terminate cannot be expected, taking all circumstances into account and weighing the interests of both parties, to continue fulfilling the agreement.
A compelling reason is considered to be, for example, material breaches of the contract by the tenant, or for example, an urgent need for the landlord to use the apartment for their own residence, if the landlord's interests outweigh the tenant's interests (for example, significant deterioration of the landlord's health or loss of living space). Additionally, the reasons for extraordinary termination are separately listed in sections 314-319 of the Law of Obligations (for example, if the tenant is in arrears with rent payments for several months, uses the rented property in breach of the contract, etc.).
By the way – the sale of an apartment is not considered a compelling reason.
If the conditions for extraordinary termination arising from the law are met, then the agreement can in principle be terminated immediately (also an indefinite rental agreement), except in cases where the law clearly provides that notice of termination must be given (for example, if the tenant unlawfully allows a third party to use the property, and as a result the landlord or neighbors are so disturbed that the landlord cannot be expected to continue the rental agreement).
Of course, there is a risk that when terminating a contract extraordinarily, the party to whom the termination notice is presented may not agree with the grounds stated in the termination notice and may appeal to the rental commission or court to determine whether it is possible to terminate the rental agreement extraordinarily or not. In such a case, the court will take into account on a case-by-case basis whether the terminating party has a compelling reason for extraordinary termination of the contract.
If it is found that there is no compelling reason, a claim for damages may arise against the terminating party. Therefore, I recommend using the assistance of a qualified lawyer when drawing up a termination notice, who can motivate and justify the extraordinary termination of the contract.
In summary, the correct conclusion of a real estate rental agreement is of paramount importance to avoid potential disputes or even court proceedings later. Early termination of a rental agreement is possible for a compelling reason, but care must be taken to ensure that the respective notice is thoroughly motivated and correctly drawn up.
Explore rental offers HERE
Article source: Real Estate News
