Real Estate Investor · Kirkland, WA · Member since 2013 · 42 posts · 2 votes
hi everyone,
I have another question today and need your advice.
I have a tenant that he told me two days ago that he needs to terminate his lease early. He has to move back to CA because of job change, and he will move out before July 1st. (so 30 day notice). His lease ends the end of Sep, so he has three month left on his lease. There's no early termination clause on my contract. He has been a good tenant, always pay on time and keep the house very clean.
I said I am ok with him to terminate the contract earlier, but he needs to pay one month rent as early termination fee, and he will be liable for rent as well until I find new tenant. It's a good house, so I expected it to be rent out in one month. He's not happy about the fee and said that I can either ask for a termination fee, or he will pay the rent till new tenant move in, but not both.
Did I ask too much? I searched online, there are various situations. I want to know your opinion.
West, MI · Member since 2012 · 674 posts · 182 votes
13y
1 month is fair.
When people are going to leave, they do. A lease may make some people sleep better at night but tenants will break them in a heartbeat. If a mutual agreement can be made right away it is much smoother. If they feel a person is being bullheaded you won't get a dime besides a judgement and a lot of wasted time.
Rental Property Investor · Fredericton, New Brunswick · Member since 2013 · 7k+ posts · 4k+ votes
13y
Serena Sun:
You did not ask too much, what you are doing is fairly common practice. In fact, here in New Brunswick, the standard lease (i.e. part of the legislation), states that in the case of early termination of a fixed term lease, the tenant's obligations are for the shorter of:
a) The remainder of the lease period; or
b) The first full rental period (typically a month) where landlord is able to lease the property to new tenants.
Real Estate Investor · Audubon, PA · Member since 2009 · 13k+ posts · 8k+ votes
13y
The tenant is being cooperative, so I'd agree with him paying rent until you fill it with somebody EQUALLY (or better) QUALIFIED as the existing tenant. Make sure tenant cooperates in showings, by keeping it tidy, and by being flexible in allowing you to show it to prospects. Advertise it ASAP and get your new occupant in there for July 1 or August 1 - this is the "busy season" for locating tenants (at least in my area).
Had this been November 1 rather than June 1, I might say something different :) - although if the tenant agreed to pay until I found somebody I'd be concerned with how long they could pay two rents (to new landlord where they move plus you/me).
Investor · Clairemont, CA · Member since 2011 · 3k+ posts · 2k+ votes
13y
Roy N. can you clarify? You say he did not ask too much but then post an example showing the standard as being the shorter of the lease remainder or full rental period.
Serena Sun is asking for 1 month plus the unleased period. I would say yes you may be asking too much here is why:
This is kind of good in that you will have 0 vacancy since he is going to pay the rent until it is re-rented, you don't normally get that with a turn over so while the early lease break is a disadvantage it comes with a distinct benefit for you.
I would say it seems like you're double dipping you get a month's termination and then until you re-rent you get to charge him and then if it only takes 2 weeks to re-rent you've received 6 weeks rent for 2 weeks time. Plus repairs will be out of the security.
I'm not saying you don't deserve something but it seems a little much.
Property Manager · Big Bear Lake, CA · Member since 2013 · 585 posts · 330 votes
13y
I think it's too much. As long as he is paying till you get a new tenant, that is great. It is not often someone will do that. I would hang onto his security deposit until the new tenant moves in. That way, if he can't pay rent in 2 places, you have his security deposit to fall back on.
Rental Property Investor · Fredericton, New Brunswick · Member since 2013 · 7k+ posts · 4k+ votes
13y
Matt Devincenzo:
I missed the one-month in addition to the balance of term / until unit is re-rented. For some reason, I read that as a minimum of 1-months rent ... as in, there would be little chance of having the unit ready to re-rent for July.
Real Estate Investor · Kirkland, WA · Member since 2013 · 42 posts · 2 votes
13y
Originally posted by Matt Devincenzo:
Roy N. can you clarify? You say he did not ask too much but then post an example showing the standard as being the shorter of the lease remainder or full rental period.
Serena Sun is asking for 1 month plus the unleased period. I would say yes you may be asking too much here is why:
This is kind of good in that you will have 0 vacancy since he is going to pay the rent until it is re-rented, you don't normally get that with a turn over so while the early lease break is a disadvantage it comes with a distinct benefit for you.
I would say it seems like you're double dipping you get a month's termination and then until you re-rent you get to charge him and then if it only takes 2 weeks to re-rent you've received 6 weeks rent for 2 weeks time. Plus repairs will be out of the security.
I'm not saying you don't deserve something but it seems a little much.
Thanks Matt,
I am new to business, so I just search online. I was thinking it's the commom practice to charge termination fee (for my time and energe to search for new tenant).
Thanks for the advice. I will charge him one month rent for early termination, and no more extra rent. He said it's ok to keep part of his deposit after I talked with him today.
Real Estate Investor · Kirkland, WA · Member since 2013 · 42 posts · 2 votes
13y
@Steve Babiak
Thanks Steve for the advice. I decide just charge him one month. I will try best to rent it out. Hopefully before he moves out.
As I said, he's a good tenant, keep the house very clearn and in good condition. (even better than my home). I did make ads today, and plan to show the house to couple people tomorrow. He said it's ok.
West, MI · Member since 2012 · 674 posts · 182 votes
13y
1 month is fair.
When people are going to leave, they do. A lease may make some people sleep better at night but tenants will break them in a heartbeat. If a mutual agreement can be made right away it is much smoother. If they feel a person is being bullheaded you won't get a dime besides a judgement and a lot of wasted time.
Los Angeles, CA · Member since 2013 · 555 posts · 261 votes
13y
Sounds like double dipping. You could certainly do whatever you want though.
I want to be fair, and I'm more concerned with the tenant cooperating to show the house. Whatever the case is, the rule is that the tenant is on the hook for rent until a good replacement is found.
Tenant pays until the day the next tenant moves in, including turnover prep time.
If I found a tenant who was able to move in July 1, I would make the current tenant move out June 25 so I could prep. He would also pay rent through June 30.
Those 5 days would be considered his termination fee.
In this case, you lose no rent. Normally, at the end of a lease, you lose rent due to time spent cleaning and prepping. If you make the tenant pay for this downtime, it's win-win; he gets to leave early, and you lose no rent.
Real Estate Investor · Kirkland, WA · Member since 2013 · 42 posts · 2 votes
13y
hi Mike,
Thanks for your opinion. I have no idea that I was "double dipping". I am glad I asked here. Tenant is very cooperative about showing the house. He said he would hire prefessional to clean the house after he moved out. I showed five couple today. I hope it can rent out soon.
Although yesterday the tenant said it's ok to charge termination fee, today, the wife is saying that they don't have extra cash, asked if I can just keep their deposit. Should I do that?
Real Estate Investor · Kirkland, WA · Member since 2013 · 42 posts · 2 votes
13y
Ryan, good advice.
Thank you. I don't want to make their move more difficult. It has been tough month for them to need to move right away. I will try to work with them to make it easier.
Los Angeles, CA · Member since 2013 · 555 posts · 261 votes
13y
Originally posted by Serena Sun:
Although yesterday the tenant said it's ok to charge termination fee, today, the wife is saying that they don't have extra cash, asked if I can just keep their deposit. Should I do that?
If the place is in good condition, and if he actually hires someone to clean, that would work.
If the place is in bad condition, then you have little money left for either the termination fee or the actual deposit, whichever way you see it.
Whenever I see termination fees mentioned, they're usually equivalent to 2 months' rent, and the tenant is off the hook.
You're betting you can rent the place out in 1 month and make a 1 month profit.
However, it could backfire, and you may find it hard to rent in the middle of winter with a 3 month vacancy. Then you lose one month.
If you have the tenant pay until the next tenant moves in, you make zero profit guaranteed.
Only do big termination fees if your rental is in high demand all year round.
Real Estate Investor · Kirkland, WA · Member since 2013 · 42 posts · 2 votes
13y
Mike Franco,
The house is in good shape if they don't damage it when they move out. I don't know if he will really hire professional to do the cleaning. It worries me a bit about keeping the deposit as the termination fee. I was afraid that there are unpaid utility bills that i would find later on.
Anyway, I will try to ask for the fee one more time, and will try to put it in writing.