NetLease - Lease Terminations Proposals

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 Process:

Navigate to NetLease > Lease Management > Termination List and then select New NetLease Termination

On the Lease Termination page, change Status to Pending Approval
Select the lease for which the modification is proposed
Once a lease is selected, the current lease attributes will prepopulate into the Prior to Termination section
Update the fields as necessary for the Lease 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.	04/01/2019
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	3,500
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

After double-checking updates and inputs for the Lease Termination, click Save
You will be navigated back to the termination list and you will see the lease termination proposal with a status Pending Approval
Once the lease has been reviewed, the status can be changed to either Approved or Rejected
After this is complete, you can select view on the lease and click Terminate
Alternatively, you can navigate to NetLease > Mass Update Leases > Mass Terminate Leases and select Proposals Only to see all the leases that have approved termination proposals
Once the termination has been initiated, the lease page will be refreshed with the Processing Status updated to read Processing Termination. Refresh the page periodically until the Processing Status is blank and the Status is Terminated
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

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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