It may be necessary for lesses to leave their current lease agreement. This can be due to the excessive cost associated with the lease or some other reasons. However, majority of the lease agreement provides a clause for such an exit, known as lease buyout. Lease buyout gives the freedom to the lassee to exit the lease agreement at any point in time given the exit is done according to the terms of the lease agreement. In majority of the cases, the lessee will need to give prior notice and the person will need to pay a certain sum of money as penalty to reduce the loss of the lessor. Sometimes, there is a rent-responsible clause mentioned in the agreement which states that the lessee will continue to pay rent until the property is leased to someone else.
A lease buyout is an agreement whereby the tenant pays a certain amount of money to discontinue the lease agreement for the remainder period. For example, if an individual or lessee has entered into a lease agreement for one year but must move out after 4 months then he will have to pay a certain amount to the lessor to break their lease. Lease buyout may be a cheaper alternative for most of the lessees. The lessor also gets an opportunity to do something new with the property or to charge a higher amount as lease rentals. In this case, the lessor may charge less than the total balance outstanding of the lease agreement. Thus, it benefits both the parties in this way and helps them to recover the associated opportunity cost to some extent.
Lease buyout gives the flexibility to an individual to exit a lease agreement whenever he wants. Lease estate are usually complex and has many conditions associated with it. However, the concept of lease buyout makes it flexible to some extent. It is profitable for both the lessor and the lessee. The lease buyout mechanism also looks forward to maintaining the profitability and income of the lessor. If a lessee leaves before the tenure of the agreement then it will result in losses for the lessor. For this reason, the conditions of the lease exit mentions that the lessee will have to give prior notice and pay a penalty to the lessor for exiting. Thus, it can be said that the concept of lease exit benefits both the lessor and the lessee.
