How to Handle a Tenant Breaking a Lease

Question

I have a tenant who wants to break her year lease 5 months early. She has offered to pay 3 of the 5 months  but keep her deposit and last months rent.

If we let her go, having some buffer to find a new tenant would be nice but the fact that we need to find one during the holidays and leading into winter does not sit well with me. Plus she is breaking her lease. Should I negotiate the amount with her and let her go and hoping we find someone for Jan 1, or do I play hardball and hold her to the lease?

Some backstory, she paid her first 6 months upfront because she sold her house to get out of debt. She did not have a job but paid upfront to build trust and assured us she would have a job in 6 months time. Last week she sent a picture of a small hole in the linoleum floor and crack in trim which looks like she dropped a heavy piece of furniture. She said it happened while she was out of town and now does not feel safe in the house. December was the first month she was to pay after her 6 month prepayment but I knew right away she was going to use this strange hole in the floor to get out of her lease now that she needs to start paying. She did pay December rent and then waited a week before she said she wants to leave.

Any suggestions on how to handle this situation? The house is in North Carolina. Any advice is greatly appreciated. Thank you!

Jennifer Klein · Answer

Thank you all so much! This was super helpful and great to know about creating a termination agreement. I really appreciate the advice.

Nathan Gesner · Answer

Welcome to the BiggerPockets forums!

The law usually says you can hold them liable for rent and other expenses until a new Tenant takes over, but you have to make a "good faith effort" to find a replacement. This gives you two options:

1. Start marketing for a new renter. If you find one willing to rent for the same terms and moving in February 1, then you can only hold the current renter liable for rent up until January 31st, then you would release her. I recommend you not apply last month's rent because it's technically not her last month so I would handle it along with the deposit after her departure.

2. Second option is to negotiate an early termination fee. She's paid for December. If she forfeits her last month's rent and deposit, that gives you through February to find a replacement Tenant before you start to incur a loss. That shouldn't be hard to do in your market.

I prefer to negotiate an early termination fee because it almost always puts more money in my pocket. I can usually find a replacement Tenant in under 30 days, even in the winter, so anything paid beyond that is profit.

Pat Lulewicz · Answer

Are you keeping her deposit and last month? In that case, makes you whole through the end of her lease, and you can start looking for another resident. If I misunderstood and she's only paying you 3 months and keeping the rest, if y'all sign a termination agreement, that should give you free and clear ability to look for another tenant immediately and through end of March while already having the income from those months.

If she truly is willing to pay 3 months of rent to leave, going through eviction wouldn't do anything for you financially, however it would show up on her record so other landlords know (you took one for the team).

There's definitely other creative options to work through this situation with the tenant if you want to send me a PM to spitball a few