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The term ‘lease buyout’ when used in real estate transactions refers to an agreement where the lease of an existing tenant is given up for its remaining term. The agreement makes the existing lease null and void at the point the agreement is signed. Lease buyout could be undertaken by the landlord, the tenant, or a third party. The term is commonly used in commercial real estate transactions.
An entrepreneur tenant can offer the landlord a certain amount of money and choose to make a lease buyout to shift the business to a prime location. On the other hand, a landlord can also make a lease buy out if s/he wants to replace the existing tenant with a new tenant who will pay him/her a higher rent. In such cases the landlord will have to pay the tenant an agreed amount to extinguish the lease.