Termination of the rental contract: find out how to do it!
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The termination of the rental agreement may occur for several reasons.
Sometimes, the tenant may no longer be satisfied with the property and may have found another apartment to rent that they like better. Or, they may have been transferred to another city for their job.
Whatever the reason, when you leave your property before the minimum time established in the rental agreement, you will have to follow all the rules that involve this breach.
Just as when signing the document, in any termination of the rental agreement by the tenant, the tenants have their rights and obligations. Among them, the most important are the entry and exit reports and, mainly, the payment of the fine.
This amount should be agreed upon at the outset when discussing the terms of the lease. However, if you want to negotiate it when you leave , you can still do so. Of course, if both parties agree to it.
We know that this is a delicate time and that it causes anxiety for many tenants. That's why we're here to help you! Terminating a rental agreement can be done as smoothly as possible, without any harm to either party.
In this text, we have prepared a step-by-step guide with all the rules and rights of all those involved, such as how to calculate the termination fine, when it is no longer valid and in which cases it can be negotiated.
See the topics that will be covered:
- Is there a law that defines the termination of the rental contract?
- What are the tenant's rights and duties when terminating the rental agreement?
- How to calculate the fine for early termination of a rental contract?
- Can I negotiate the termination fee for the rental agreement?
Ah! If you are terminating your current lease and looking for a new place to live in SP - take a look at the apartments we have available!
Let's get started!
Is there a law that defines the termination of the rental contract?
Yes! As bureaucratic as they may be and contain that “legalese” language that is difficult to understand, property rental laws are very important to help everyone involved in this process.
In this case, the rules covering the termination of the rental agreement are present in the famous Tenancy Law ( 8245/91 ). Its article 4 allows the termination of the rental agreement by the tenant before the minimum period established in the document. See:
"DURING THE PERIOD STIPULATED FOR THE DURATION OF THE CONTRACT, THE LANDLORD WILL NOT BE ABLE TO RECOVER THE RENTED PROPERTY. WITH THE EXCEPTION OF WHAT IS STIPULATED IN § 2 OF ARTICLE 54-A, THE TENANT, HOWEVER, MAY RETURN IT, PAYING THE AGREED FINE, PROPORTIONAL TO THE PERIOD OF COMPLIANCE WITH THE CONTRACT, OR, IN THE ABSENCE OF SUCH FINE, THAT WHICH IS LEGALLY STIPULATED."
For this to happen, there are some rules to be followed. Among them, security and guarantee clauses are established, with the rights and duties of each of the parties.
Does it need to be described in the contract?
“Why does the rental agreement need to have so many clauses and rules?” So that no one is harmed!
This document should be prepared as completely as possible! Ideally, all of this should be defined and agreed upon by both parties before it is signed.
Typically, in cases where the tenant terminates the rental agreement, the landlord will set the amount that will be charged as a fine and when it will be paid. If this is not written down, the standard is to charge the amount of three months' rent proportional to the remaining time.
But remember that we said that everything can be negotiated? We have seen many cases where landlords exempt the tenant from paying the fine if they have stayed in the property for at least 12 months.
That is, of course, if he gives at least one month's notice of his departure.
What are the tenant's rights and duties when terminating the rental agreement?
Remember the Tenancy Law? It is largely responsible for guiding and governing the rental of properties in the country. Among all its rules, we can find all the rights and duties of the tenant when terminating the rental agreement .
There are a lot of details! That's why we've separated the main ones into the following topics. See:
Tenant's rights upon termination of the rental agreement
Let's start with the tenant's rights when terminating a rental agreement. These include advance notice, a notice of departure, proof of payment and a very common question: the possibility of reimbursement in the event of improvements.
Know in advance the amount to be paid
This is a basic rule and a fundamental right of the tenant in every rental agreement. Under no circumstances should you sign this document unless it clearly states all the rules and rights of all parties involved! In particular, the amount of the termination fee.
No one wants surprises that affect their pockets. Have you ever imagined wanting to leave a property and discovering that the owner will ask for a huge fine that you were not expecting?
This is more than enough reason to cause major disagreements. Therefore, make sure that the amount of the fine is stated in advance in the document. And above all, you must agree with the amount charged.
There should be no abuse by either party. Agreement between everyone is very important to avoid any disputes as much as possible.
Receive exit inspection report
Before receiving the keys to the property, an expert must check that it is in perfect working order. An inspection report will be attached to the rental agreement proving this and detailing all the objects and conditions of the property (if the paintwork is in good condition, if there are any damaged objects, etc.).
Likewise, before you leave, the property must be returned in the same conditions in which it was received. Also, with a departure report that proves this. It must contain the same furniture or, in some cases, similar ones.
Let's use an example. Imagine that you rented an apartment with a lamp in the living room, but for some reason you decided to remove it. When you return the property, the lamp must be replaced. If there is no way to install an identical lamp, you must replace it with an equivalent one.
In another comparison, you cannot buy an apartment that has a shower and return it without the item. The owner will be completely harmed! The tenant will only be exempt from this obligation in cases of wear and tear that were not his/her responsibility.
For example, if you lived in an apartment that received a lot of sunlight during the day for 10 years and, over time, the flooring became worn out, you would not need to get a refund because the weather caused the damage, which is beyond your control.
Receive proof of payment
This topic is very important: do not finalize the rental contract refund without proof of payment of the fine!
If not, how will you be able to prove that you paid the amount due? Imagine if, after a few months, the owner questions that you did not pay the debt and even tries to file a lawsuit?
What a headache! To avoid this, proof of payment is essential. It will contain all the information that the tenant has complied with what was owed and will serve as security to ensure that there are no future charges.
I made several improvements to the property, can I receive a refund?
This is a very common question. Many tenants want to make renovations or improvements to the property while they are living there. But what happens when the time comes to terminate the lease? Are you entitled to a refund for these changes?
Not exactly. Any renovations for improvements must have been requested and agreed upon in advance between the parties, and must also be described in the rental agreement.
If the tenant decides to change something without prior agreement, the landlord is not obliged to refund the amount. Not to mention that the landlord can ask for the changes to be undone - after all, the property must be returned in the same condition in which it was delivered. So always, always, always, talk to your landlord before investing too much in improvements!
Many people try to negotiate this amount, but we have to be honest: the chances of this being approved are minimal.
Tenant's duties upon termination of the rental agreement
Every tenant also has their duties when terminating a rental agreement. These include complying with the notice period, returning the property in the same condition as when it was received and, most importantly, paying the fine.
Let's look at each of them in detail so that there are no doubts.
Respect the 30-day notice period (or pay an equivalent fine)
When terminating the rental agreement by the tenant, it is the duty of every tenant to give at least 30 days' notice.
It represents an advance notice of your departure, so that the owner can organize himself and, most importantly, find another interested party for the property.
In the absence of such notice, the Tenancy Law allows the property owner to charge a fine equivalent to that period. Its value corresponds to one month's rent, along with other charges depending on the case.
Deliver the apartment clean and free of objects, in the same condition as you received it.
We have already mentioned this topic above, but it is always important to emphasize that it is the duty of every tenant to return the property in the same conditions in which they received it.
This means not only cleaning but also furniture and objects that were purchased later. All of these must be removed when the rental agreement is terminated.
Remember that if you have removed any furniture (lamp, bed, kitchen item), you must also return it or replace it with an equivalent item.
Pay the fine for early departure (if applicable)
Any termination of a rental agreement by the tenant requires an early departure penalty.
As we discussed, the amount will depend on each case. In the next topic, we will explain in more detail how to get an idea of how much will be stipulated. But first, let's look at one last duty.
Pay a fine for any damage or breakdowns to the property
If you received the property in perfect condition, you cannot hand it over with something wrong. Any damage or breakdowns that may have been caused will cost you money.
All of these must be repaired and serviced before delivery. And don't try to hide it, because remember that the place will undergo an inspection upon departure so that the owner can be sure that their property is in the same condition as before.
How to calculate the fine for early termination of a rental contract?
The Tenancy Law does not define an exact amount of fine to be charged upon termination of the rental agreement by the tenant. The standard adopted by the market is that the amount corresponding to three months of rent is charged.
Despite this, it is important to emphasize that it is possible to negotiate freely about how much will be charged. Remember that there should be no abuse on either side, otherwise, whoever is harmed may file a lawsuit.
Here is an example of how this agreement can be made. Imagine a rent of R$1,500.00 per month (not including fees such as condominium or property tax), with a 30-month contract. Then, the tenant announces that he wants to leave the property in the 15th month.
In this case, the amount of the fine would be:
- Contractual fine: (R$1,500.00 × 3) = R$4,500.00;
- Proportionality: R$4,500 ÷ 30 months = R$150.00 per month remaining;
- Fine applied in the specific case: 15 missing months × R$150.00 = R$2,250.00.
This would be the normal amount of the fine to be applied. However, if the tenant does not give one month's notice, he will have to pay an additional amount of rent on top of this total.
There is another important point about terminating a rental agreement. Typically, electricity, water and internet bills are in the tenant's name when they move out and, therefore, must be collected before they leave.
Don't forget to call the companies responsible for these accounts and ask for them to be disconnected.
If they are in the landlord's name, it is important to reach an agreement on when they will be paid. Most of the time, tenants pay the bills until the last month they stay in the property.
When is the fine for termination of the rental agreement not due?
Although the Tenancy Law establishes the payment of a fine upon termination of the rental agreement by the tenant, there are some exceptions in which it ceases to be valid.
These include cases where the tenant is transferred because of their work. For example, if you live in São Paulo but your company needs you to move to Belo Horizonte, you will not have to pay this fine for early departure.
But be careful not to make a mistake. If you choose to move to another city to get another job opportunity, the exception will no longer apply! After all, it will be a move by choice and not by obligation.
So, pay close attention to whether your case falls into this category to make sure the fine is due.
Can I negotiate the termination fee?
It is possible, but ideally this negotiation should be done before signing the rental contract.
This is the best time to come to an agreement on this amount. Sit down and discuss the issue with the owner so that you both can reach an agreement that is favorable to both of you.
Remember that the Tenancy Law does not require the collection of an exact amount of fines? Everything can be agreed upon, including the number of installments in which you can pay the required amount and the possibility of discounts.
If you want to negotiate after the contract has already been signed, there is still room to try. Especially if you communicate your departure in advance so that the owner can find someone else to live there.
After all, the fine serves as a financial guarantee for the landlord, since he will lose his tenant and run the risk of having difficulty finding another one quickly. Any type of negotiation that makes you more comfortable is valid. So, give it a try! You may be able to reach a new agreement that is still good for both of you.
Conclusion
Tenant termination of a rental agreement does not have to be a time of tension and anxiety. Although it may cause some concern for the landlord, it is possible to put his mind at ease if he follows all the rules and obligations above.
Make sure you return the property in the same condition you received it, comply with the notice period, and also make sure you receive the fine payment document. This will provide you with proof that you have complied with everything established by law.
To learn more about property rentals, we have several articles on our blog ! Take a look and, if you liked this article, share it on social media.