NetLease - Lease Terminations

Use Case 

Circumstances may require an early termination to the lease. In these instances, a termination is required to remove the entire ROU Asset (and accumulated amortization), as well as any remaining lease liability, settling the final payments received, with an offset to the gain/loss account.


Step by Step

  • Navigate to the lease record to be terminated. An example lease record to be terminated is shown here                 

  • Select Terminate on the lease record to navigate to the Lease Termination page.  

  • Enter the information as it pertains to the termination.

Field

Description

Example

Effective Termination Date

Defaults to the first period without amortization recorded. To update to a later period, monthly journals will have to be run up to that point – please consider carefully before skipping ahead. If the default termination date on the screen is later than the desired termination date, deleting amortization entries for month of termination will be necessary. 

Mid-Month Terminations are supported when the global setting is on. See the NetLease - Mid-Month Terminations article. 

7/1/2025

Cash Paid to Terminate Lease

Input the amount to be paid in the lease termination month. Note that this amount should include both (1) standard lease payments, as well as (2) termination penalties or other consideration to be paid upon termination
Note: This amount will be recorded to the Lease Liability Payable Clearing Account

500

Cash Received to Terminate Lease

 

Input the amount to be received from the termination.
Note: This amount will be recorded to the ROU Clearing Account

0

Termination Reason

Provide a brief description of the reason for the termination. 

Early termination

Termination Note

Provide any additional description or details for the termination

Excess supply and under-utilized; to return to lessor

Gain/Loss AccountGL override option for the Gain/Loss posted on the termination transaction. Defaults from the Lease Type record. 8200 Gain/Loss
  • Once correct, click Terminate to process the termination, run the journal, and update the lease schedule.
  • You will be redirected to the NetLease Lease record where there will be a green banner that the termination has processed or a yellow banner if an error occured.
  • Once the termination is complete and you’ll see the NetLease Termination transaction and removal of all subsequent amortization schedule lines

  • Click on the hyperlink to the NetLease Termination journal entry.

  • Terminations can be reversed from the Reverse Termination button on the lease record or from the Termination Record attached to the lease. You can also click into the Termination record to view the details of the termination for audit purposes.

G/L Considerations

  • Note that the journal entry reverses all cumulative balances in ROU Asset (Gross), Accumulated Amortization, Lease Liability (LT), and records the amount payable, with the offset to gain/loss on termination.
  • Additionally, any Short-Term lease liabilities or interest payable amounts that were in the GL in the previous month will already have been eliminated due to auto-reversing status.
  • Sublease terminations that include cash paid/received will result in Netlease booking a journal entry to book the gain/loss to the P&L upon termination. If the sublease has accrued rent at the termination date, Netlease will book a journal entry to remove the asset balance.


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