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ARTICLE · 04 SEPTEMBER 2025

Early Lease Terminations: Understanding And Managing Avoidance Risks

Mayer Brown
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When faced with a financially distressed tenant, an early lease termination agreement can be an effective means for a landlord to resolve the uncertainty created by its tenant's financial distress and to mitigate potential economic losses.

United StatesReal Estate and Construction
Craig Reimer
Craig Reimer
Danielle A. Sigal
Danielle A. Sigal
Jennifer Kellner
Jennifer Kellner
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When faced with a financially distressed tenant, an early lease termination agreement can be an effective means for a landlord to resolve the uncertainty created by its tenant's financial distress and to mitigate potential economic losses. Such agreement typically provides that, in exchange for the tenant making a final payment to the landlord, vacating the leased premises, and surrendering possession, the landlord agrees to an earlier expiration of the lease term and to release the tenant from having any further rent or other payment obligations. Nevertheless, the benefits of an early lease termination agreement should be carefully weighed against the potential downside avoidance risks that could arise if the distressed tenant becomes the subject of a bankruptcy proceeding. As part of determining whether and on what terms to enter into an early lease termination agreement, a landlord should be aware of the theoretical risks that sections 547 and 548 of the Bankruptcy

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This Mayer Brown article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein.

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