When tenants want to break their lease: a guide to early terminations for landlords
What do you do if your tenants want to leave their lease early? They have signed a legal document that binds them to the terms, including to pay rent until the move-out date you specified. However, as much as the lease serves to protect the landlord, there are laws are in place to protect tenants when they want out. As a property owner, it’s important you know how to handle these situations to make sure you communicate clearly and fairly, follow legal protocol, and ultimately, meet your bottom line.
Why Does the Tenant Want to Terminate their Lease Early?
Tenants want to break their leases for lots of different reasons—personal, professional, or because the landlord breached the lease. Depending on the reason, the landlord might be legally bound to release the tenant without damages (as long as the tenant follows protocol). In other situations, it makes sense to be compassionate and work with the tenant to find a solution.
If the tenant found a place they prefer, is moving in with their partner, plans to buy a home, or is relocating out of town, the landlord not on the hook to release them early.
Always also be prepared for your tenant to present false charges claiming issues such as inhabitability if they want to get out of their lease early. Keep maintenance records and photographs to show you maintained the unit well and made repairs quickly.
Your Tenant’s Duty to Mitigate Damages
When your tenant sends you a formal early termination of lease letter and plans to vacate the unit prior to the end of the lease, you are not obliged to allow the tenant to leave early. They have a binding contract to continue to pay rent until the end of their lease.
However, there is always a solution that keeps both parties happy. You are entitled to give your conditions in writing such as covering the cost to find a new tenant and ensuring that not a day’s rent is lost in the process. While you’re searching, your tenant is still responsible for paying rent.
It is important to ensure that the new tenant is approved by both parties (landlord and tenant – and a property manager in most cases).
Do Not Let the Tenant Find an Informal Sublet
As an act of good faith, the tenant might offer to help find a new tenant. This is not required but can facilitate the process. You can also formally ask them to help you. As you would for any applicant you’d find on your own, screen the applicants the tenant finds and hold them to the same requirements.
Do not allow the tenant to make commitments on your behalf by informally finding a sublet. You want to maintain your control over who you allow to live in the property to make sure they’ll be good tenants and not damage your property or cause problems.
What to Include in an Early Termination of Lease Clause with an Early Termination Fee
When you create your lease agreement, there are some standard clauses you can put in place that protect both you and your tenant. Some points you might want to consider:
Minimum notice for a tenant to request an early termination of lease (typically 30-60 days)
Notice must be written and signed by all tenants involved in the termination
If the tenant does not follow the process, vacate before the agreed upon date, pay other incurred charges, or any combination of the latter, the attempted early termination will be void and every other aspect of the lease will apply.
Draw this up with the proper legal language and include it clearly in your lease. When signing on new tenants, go over each clause to make sure everything is fully understood.
Don’t (Necessarily) Seize the Security Deposit as Rent
Requiring an early termination fee is legitimate, however, seizing the security deposit and using that as rent is not advisable. You collected the security deposit to make any repairs to the unit caused by the tenant’s occupancy beyond fixing normal wear and tear. If you put this money toward rent, you no longer have the funds to make the repairs as you normally would need when a tenant moves out.
Should You Let Your Tenant Terminate Their Lease Early?
As always, it depends. Your relationship with your tenants and reputation as a landlord matters just as much as your bottom line. You can’t make them stay, but you can remind them of their obligations on the lease continue to hold them financially responsible until you fill your rental property. A rock-solid lease will help you out and make sure you’re compensated when tenants want to leave.
Managing your tenants, finances, and documentation is a lot of work, especially when things get complicated. Consider bringing on a property manager to handle all of the ins and outs of tenant turnover and leasing, communication, and more. If you’re ready to start looking for a property manager, R.A.D Property Management is here to help.