Terminating a rental agreement is a fairly common process and is not complicated if you prepare properly. Lia Siht, Head of Legal at Rendin, explains what to pay attention to when ending a lease and what to do in case of property damage or outstanding debts.
1. Terminating the rental agreement
Terminating a rental agreement is done in accordance with the law, and the options for doing so vary depending on the type of agreement.
Termination of a termless rental agreement
A termless rental agreement can be terminated at the request of one party with three months' notice. The party does not need to provide a serious reason for ending the agreement; both parties have the right to exit the lease by adhering to the notice period.
The lease can also be terminated earlier by mutual agreement. To terminate the lease, a notice of termination must be submitted to the other party in a form that can be reproduced in writing (e.g., via email or message).
Termination of a fixed-term rental agreement
A fixed-term lease ends on the date agreed upon at the time of signing the contract or earlier by mutual agreement of the parties. It cannot be terminated unilaterally without a valid reason. If the parties reach an agreement and wish to terminate the lease early, this must also be documented in writing.
Extraordinary termination of a rental agreement
Both termless and fixed-term lease agreements can also be terminated extraordinarily. Extraordinary termination is permitted under the Law of Obligations Act (§ 314-319) if the reason for termination is sufficiently compelling and if continuing the agreement is no longer in the best interest of both parties.
"Generally, this includes serious breaches of the contract, delays in paying rent, or situations where the tenant is unable to use the rented premises due to reasons arising from the landlord," Siht clarifies. "Minor inconveniences or changes in personal circumstances, such as a decrease in income, a breakup with a partner, or relocating for a better job offer, do not provide grounds for extraordinary termination."
The notice of extraordinary termination should clearly indicate the rented property, the date of termination, the grounds for termination, and the procedure and deadline for disputing the termination. "Rendin users can use our document template created by our lawyers for this purpose," explains Lia Siht, the Head of Legal at Rendin.
2. Return of the rental apartment
When the termination date of the lease agreement arrives, the condition of the rental property should be inspected, and the keys should be returned by the tenant.
“We recommend visiting the rental home about one month (or at least one week) before the end of the lease to review the premises with the tenant and, if necessary, address any identified issues. This gives the tenant enough time to fix any issues,” Siht advises.
“Additionally, the landlord can resend all the photos taken during the handover of the rental property, highlighting the condition of the property at move-in so that the tenant aims to restore it to a similar state,” she adds.
“According to the law, the rental property must be returned in the same condition it was in at the time of handover. However, it is important to remember that the tenant is not responsible for normal wear and tear and is only required to eliminate the damages that occurred as a result of their actions or negligence,” the lawyer emphasizes.
“This means that the landlord has no grounds to demand that the tenant purchase new kitchen furniture if the surface has a few scratches from regular use or to replace an old sofa if its springs are slightly worn,” she explains.
“The length of the rental period also plays an important role here. Sofa springs don’t wear out in just a few months, but over longer periods, the landlord needs to consider greater depreciation, especially if the lease lasts for years. For example, the rental commission found in one of its decisions (11-1/82/16) that soft furniture depreciates by 10% each year,” says Siht.
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3. Preparing the handover protocol for lease termination
Experienced landlords know that a handover protocol must be created when signing a lease agreement. The same document should be completed when the lease ends. This allows for a proper comparison between the two protocols: one made at the beginning of the lease and the other at its conclusion.
“In this way, it is possible to determine whether any identified issues arose due to the tenant's actions or if they were present before the tenant moved in, and who is responsible for eliminating them. Without the protocol, disputes can lead to a he-said-she-said situation, making it nearly impossible to prove who is right,” says the legal expert.
Like the handover protocol, the termination protocol should include detailed photos and descriptions of all rooms, as well as the final meter readings. If the landlord discovers any issues in the rental property, these should also be documented in the report.
“For Rendin users, creating the termination protocol is made especially convenient, as they simply need to follow the prompts from the application and fill in the empty fields. After completion, the report should be emailed to the tenant for confirmation. If disagreements arise between the parties, our legal team will contact them, clarify their concerns, and help find a solution to the problem,” explains Siht.
4. What to do if the tenant doesn't pay the last month's rent and utilities
It is quite common for some unpaid bills to remain after the lease ends and the property is handed over. This is especially true if the lease ends in the middle of the month and the parties have to wait for the final utility bill.
“The termination of the lease does not eliminate any unpaid rent or utility bills that the tenant still owes for the rental period. Once the landlord has received and forwarded all final bills to the tenant, the tenant must pay then by the due date indicated on the bill, even after moving out,” explains Siht.
“If the tenant fails to pay the last bills, an official reminder for payment should be sent to them along with an additional reasonable deadline, such as 14 days or more. If this additional deadline is exceeded, the landlord may seek compensation through Rendin,” she adds.
“If the landlord doesn’t use Rendin, they can deduct any unpaid rent and/or utilities from the security deposit. However, if the tenant's debts exceed the amount of the security deposit or if there is property damage to the rental space, recovering the debt from the tenant can become quite complicated and time-consuming,” Siht notes.
5. How to act in case of property damage
In the event of damage, the landlord must assess the extent of the damage while also considering normal wear and tear. “If necessary, the landlord can involve an industry expert to help determine the amount of the damage claim,” says Siht.
“If the value of the damage can't be evaluated, the landlord should request quotes for repair work or seek similar replacement items and/or necessary building materials at a reasonable price. Once the final damage amount is established, the landlord must present the claim directly to the tenant and set an additional deadline for payment (at least 14 days),” she explains.
Siht adds that if the tenant fails to pay the outstanding amount by the specified deadline, Rendin will compensate the landlord for the financial loss and take over the case. “Compensation is based on evidence provided by the landlord, such as photos taken during the handover and return of the property, repair quotes, invoices, and other documents,” the legal expert clarifies.
“On average, the process of clarifying the circumstances takes less than 30 days, and the landlord will receive compensation no later than 5 business days after the claim amount is confirmed and the agreement for the assignment of the claim is signed with Rendin,” she adds.
If the landlord signs the contract outside of Rendin, they will need to handle the debt collection independently. “To do this, they must submit an application along with supporting evidence to the rental commission (which is only located in Tallinn) or to the court. The application will be processed, which starts a process lasting at least a couple of months. Once a decision is made, the landlord can enforce it through a bailiff of their choice,” Siht explains.
