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Early Lease termination and security deposit
If tenant is terminating lease early and there is no past due rent or damages, can a landlord keep full or partial security deposit as a penalty for lease termination? Note a new tenant has been found and the old tenant helped with showings. There's a vague reference to it in lease contract for lease termination penalty, but not explicit. Morally it feels like it should be returned, but curious what others do.
If it is not clearly referenced in the lease and you have not mentioned this to the tenant when they indicated their move-out, I would return the security deposit in full. If not, you are just inviting issues that really are a distraction since the unit has already been rented. In the future, you could clarify this in the lease, if you would like to charge it to future residents who move out early. I would speak to an attorney before making any changes.
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Aloha,
Absent clear penalty language, generally you are not allowed by local law to "double dip"... Old Tenant pays pro-rated rent to the day before New Tenant starts paying rent. If your Rental Agreement is "vague" about early termination, you need to clarify the language for all new agreements.
Check your local laws. It is generally assumed that a valid lease agreement will be honored to it's full term. An early move out is considered a breach of contract like any other breach (like not paying rent or unauthorized pets, etc.). Your legal remedies are the same either way (i.e. notice to cure, and then eventual eviction). You can use this heavy-handed option as a bargaining chip in your favor though to negotiate some sort of early termination agreement. The way most landlords do it is to charge an Early Termination Fee "the equivalent of two months rent". Don't call it rent or deposit forfeiture. Call it a term fee, and make it due in full before move out. In this way, you can avoid being accused of double dipping as others in this thread have warned against. Treat the deposit like normal at move out, according to your local laws. And remember as always, get all this in writing with the tenant agreeing to it with a signature!
Quote from @Jay V.:
If tenant is terminating lease early and there is no past due rent or damages, can a landlord keep full or partial security deposit as a penalty for lease termination? Note a new tenant has been found and the old tenant helped with showings. There's a vague reference to it in lease contract for lease termination penalty, but not explicit. Morally it feels like it should be returned, but curious what others do.
It's best to have a plan before the problem occurs.
Is your property in Tacoma? Know the laws. All you have to do is go to Google, type in "Landlord laws [name of city or state]" and start reading. https://cityoftacoma.org/cms/O...
I also recommend you buy "Every Landlord's Legal Guide" by NOLO. Written by attorney investors, it's full of practical advice pertaining to management of investment property, has sample forms that can be edited, and - most importantly - they tell you what your primary state laws are and where you can read them. It's updated every year and is the best $40 you'll spend as a Landlord. There is one book for 49 states and a separate book for California.
Almost every state will tell you the basics: the Tenant is obligated for the full term of the lease, but you have a responsibility to find a replacement tenant as quickly as possible to minimize the charges for your departing tenant.
If your tenant moves out May 31 and you have a new tenant move in June 1, there's no loss of rent income and you would refund the entire deposit (minus cleaning and repairs). If you can't find a new tenant until June 16, then you would charge your departing tenant for 15 days of rent, plus cleaning and repairs.
I recommend you only charge a lease termination fee if your law allows it and if it's addressed in your lease.
@Jay V. , it depends on the lease agreement. I personally use the RHAWA forms https://www.rhawa.org/rental-f...
They are reviewed by WA attorneys and have a clause about early termination
Check the local laws and follow your lease. If it's vague, then refine it.
Security deposit is mainly for damage of property or cleaning need when tenant move out. Since you find new tenant in place right away & you have no lost of rent, there is no reason to hold back the security deposit.
My 2 cents:
- Check your local laws, they have a habit of changing often in Seattle. RHWA is a fantastic resource
- Refer back to lease and look for specific language
- Check with your attorney.
@Jay V. I personally would return the funds if there are no damages and another tenant has already been found. You have almost nothing to gain and potential for a number of headaches / frustrations by not returning funds.
Bottom line, treat your tenants the way you would like to be treated. In my opinion, dealing with people in an equitable way is always a good policy.
John
If I have a tenant want to leave early but I have a new tenant that is going to move in right away, then I'm not going to charge the original tenant some etra fee for leaving early.... I'm not losing any rent.
Early termination is really to cover the gap of lost rent between when a tenant leaves early and you finding a new tenant. Your are legally required to make a significant effort to fill that vacancy... i.e you cant just let it sit vacant and collect a penalty from the prior tenant and you cant rent it and stil have the previous tenant keep paying rent for the rest of the lease they signs.
Don't be that LL..... if they leave and you get someone in right away, don't be a jerk and try to squeeze extra $$ out of the previous tenant. Treat the deposit as normal and only deduct for damages etc
Typically, we would keep the deposit if a tenant moves out early, and we clearly state that in the early termination agreement that we and the tenant execute.
In the case of an early termination, the security deposit covers the cost of the vacancy to the landlord. It is there to make the landlord whole in the event the tenant does not perform according to the original lease (i.e., does not stay the full term).
That said, I have returned partial deposits if no damage and we had another tenant lined up to move in because I don't think it's fair for the landlord to take advantage of the situation to make extra money. In that case, the amount withheld is to cover the admin costs of the move out, paperwork, new lease, etc..