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27 September, 2021

2. What is the ‘diplomatic clause’ in lease contracts?

2. What is the ‘diplomatic clause’ in lease contracts?

Home Blog 2. What is the ‘diplomatic clause’ in lease contracts?

The ‘diplomatic clause’ is a phrase used in the jargon of real estate agencies, companies dealing with the relocation of corporate employees, and companies operating in the field of real estate. It refers to a special clause in a lease contracts that provides the possibility of terminating such contract before its expiry date.

The general rule when signing a fixed-term rental contract is that the parties should comply with the provisions of the contract and fulfill it. The contract may be terminated before its expiry date by mutual agreement of the parties. Without this kind of agreement, a fixed-term lease may be terminated only on the terms specified in the contract itself, which the parties have provided for – these are the rules or circumstances described in the diplomatic clause.

It assumes that the Lessee may terminate the lease, e.g. if, as a result of the employer’s decision, the Lessee is to be relocated from the current city of residence and work to another place. It is assumed that the Lessee lives in a given city mainly for professional reasons; works, and therefore needs an apartment.

In a situation where the employer transfers the employee to another city, it will be unreasonable for him to rent and maintain the apartment. In such a case, the Lessee is asked to certify from the employer the fact of relocation for the Lessor. Currently, lease agreements concluded for a period of one year are often used, assuming that the Lessee may terminate the contract with one month’s notice, e.g. after six months of the term of the contract, in the event of relocation. Such a construction means that the owner of the premises has a guaranteed minimum term of the contract of seven months (six months + one month’s notice). In the last five months, the contract may be terminated, but only due to the relocation of the tenant. If the Lessee continues to work in the given location, the contract may not be terminated before the expiry of the term. The inclusion of a diplomatic clause in the content of the lease agreement ensures the Lessee’s security, enabling the tenant to terminate the lease agreement early if, for professional reasons, he is relocated to another place of residence.

When, as Leach & Lang, we prepare templates of lease agreements for clients, we use the provisions of ‘diplomatic clauses’ that we have tested in practice.

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