Tenant Signed Lease, Wants to Annul lease
Rental Property Investor · Indianapolis, IN · Member since 2020 · 13 posts · 4 votes
Tenant Signed Lease, Wants to Annul lease
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Honolulu, HI · Member since 2008 · 3k+ posts · 2k+ votes
2yAloha,
Hopefully in addition to the SD, you collected the first month rent. Why such a long time period from apparently signing them until actual possession which is still weeks away? We require SD within two business days of approval, and rent must start the earlier of possession, or 15 days from approval, with first month rent paid prior to handing over keys.
Whenever prospective Tenants can "tie up" the rental, but have a long period of time before actually signing or paying, they usually are just continuing to look for something they like better. If they do, you get the sob story...if they don't, they probably will be a PITA for the duration.
4 Replies
- 2yTheresa HarrisPro MemberMember since 2019 · 15k+ posts · 11k+ votes
Hindsight is great. When they signed the lease, you should have included a statement that the deposit was non-refundable if they didn't move it. Once they moved in, it becomes their security deposit.
Tell them you will get the property listed immediately. Check the wording on your lease to see how much notice they need to give to break the lease. I would not try to convince them to move in-move on, but hold them responsible for any lost rent.
- Honolulu, HI · Member since 2008 · 3k+ posts · 2k+ votes2y
Aloha,
Hopefully in addition to the SD, you collected the first month rent. Why such a long time period from apparently signing them until actual possession which is still weeks away? We require SD within two business days of approval, and rent must start the earlier of possession, or 15 days from approval, with first month rent paid prior to handing over keys.
Whenever prospective Tenants can "tie up" the rental, but have a long period of time before actually signing or paying, they usually are just continuing to look for something they like better. If they do, you get the sob story...if they don't, they probably will be a PITA for the duration.
- Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes2y
Quote from @Katy Logue:
Have a B property in an A area, had 3 serious inquiries within days of listing. We ended up with the property under 12 month contract on the first showing. This was 6 weeks ago for a lease that starts a few weeks from now. Tenant now wants to annul the lease and get the security deposit back. I want to work with this tenant to find a solution as this doesn't seem like a great situation.
My plan is to remind the tenant we have a 12 month contract and I plan to proceed with the lease (ie no promises given). Then I will work in good faith to get the place re-leased ASAP. If the new lease does not begin before or on the same date as the prior date, I will prorate the initial security deposit on a daily basis until the place is leased. I doubt it goes more than a month, but if so then I will expect another month's rent. As soon as the place has a new tenant sign, I will then work with the other tenant that wants out and addend their lease.
Is there anything I am missing, doing wrong / illegal, tips?Yes. It sounds like you did not get deposit & first month's rent when you signed the lease which was a major mistake. Second error as best as I can tell is that you let someone sign a lease that didn't start as close to "immediately" as possible - ie, why were they signing a lease for a property 2 months in advance?
We *never* hold properties for tenants. We rent them when they become available and the most we're going to push out a start date is 10-14 days from the first date it is available - ie, if I was renting a house out that was available Oct 1, for the right tenant we may let them start the first month Oct 10 but no way are we letting them start Nov 1. Instead, I would just let them know that if the property is still available by then we'd be happy to accommodate their Nov 1 start date.
Beyond that, we don't consider any lease valid without payment of security+first month+any required pet deposit - in fact, this language is in our lease.
I would suspect what happened to you here is that they plunked down some money to make sure they had a house, since you only required a deposit, and then they had plenty of time to look around for other options and found something else better/cheaper.
What you will need to do here is start advertising the property immediately - since you've been notified the tenant does not plan to take possession - in order to minimize your damages, and if you find a new tenant before move in day then you will have to return the deposit because it is a deposit. Because what's going to happen is they will probably file suit against you in court to retrieve their deposit, and you will have to demonstrate losses in order to keep some/all of the deposit.
Skyline Properties - Rental Property Investor · Indianapolis, IN · Member since 2020 · 13 posts · 4 votes2y
Thank you, all.
It was a property that was inhabited when these prospective tenants signed the lease agreement. The property just became officially vacated this week and move-in is set for Oct 15th. All my standard leases state security deposit due at time lease is signed and first month due before move in.
I am hearing from everyone I should always collect SD and 1stMo up front.
Regardless, I have an executed 12 month lease with the tenant(s). I have told them I will work in good faith to re-lease the property, when I have a tenant signed I will send them an intent to vacate / terminate lease early form. If I do not have a new tenant before Oct 15, rent is due and the security deposit could potentially go toward unpaid rents / fees.
I have no doubt the property will rent ASAP so hopefully this is all moot.
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