These are two forms for legally terminating a rental contract

When your rental contract ends, it’s important that both parties, the tenant and the owner of the property, sign an agreement to terminate the contract. Not only is this needed to fix the end of the rental period, but also to ensure that all the obligations that both parties have at the end of the contract are fulfilled. To this end, there are two different forms that are typically used to finalise rental agreements in Spain – a “lease termination settlement agreement” and a “lease termination deposit retention agreement”.

Although the contract serves as the free expression of the will of both parties and the end of the rental may be terminated in many different ways, the solicitors deSalvador Real Estate Lawyers indicate these two main types of termination agreement:

• Lease termination settlement agreement: This is like the equivalent of putting a full stop at the end of the contract and closing all the contractual obligations of both parties. This form not only entails the handing over of the keys, but also brings the rental relationship to an end, “closing the door to future claims by both the tenant and the landlord,” notes the lawyer Pelayo de Salvador, from the deSalvador law firm.

   Here you can download this form for free in Spanish

• Lease termination deposit retention agreement: This is, roughly speaking, like an ellipsis … because some of the contractual obligations are closed but not all, either because the two parties couldn’t come to an agreement or because they couldn’t be quantified. This type of agreement regulates the relationship between the parties from the lease termination to the definitive settlement of the obligations, establishing the obligations of both parties.

   Here you can download this form for free in Spanish

The lawyers warn that this form leaves the door open failure to fulfil obligations in the future, disagreement between the parties and potential litigation. For example, if the deposit is retained, the parties to the contract will need to await the quantification of the unfulfilled obligations before settling the final amount of deposit to be repaid, which may give rise to future controversies.

The effects of a termination agreement on the landlord and tenant

The effects can vary depending on the type of agreement in question, but the effects common to both are as follows:

Landlord:

• Determines the moment when the property will be returned to them.
• Assesses the state of the property upon its return, pointing out imperfections the repair of which can be claimed from the tenant. It is advisable to go over the property together with the tenant so both parties can note down and agree about any damage or flaws there may be to avoid any future arguments.
• Summarises in writing all the Tenant’s outstanding obligations (unpaid bills, payment for damages, etc.), and signals what must be done to fulfil these obligations so as to avoid problems with the termination of the rental contract.
• Determines the right of the tenant to retain all or part of the deposit, thus ensuring the tenant does not claim it back with interest.

Tenant:

• Establishes the moment when all their obligations relating to the rental contract cease. As soon as the termination agreement is signed, the obligation to pay rent no longer exists.
• Signals whether the property has been returned in a good condition or if there is damage. It is advisable to go over the property together with the landlord so both parties can note down and agree about any damage or flaws there may be to avoid any future arguments.
• Summarises in writing all the Landlord’s outstanding obligations, clearly setting out their rights and responsibilities at the termination of the contract.
• Establishes the mechanisms for return of the deposit if due.