Can I charge for breaking the lease?

Question

My lease states that if a tenant breaks the lease and moves out early, they must pay a penalty equal to two months' rent. One of my tenants broke the lease and moved out. I put a lot of time and effort into finding a new tenant, and there is no gap between the two tenants.

Can I still charge the penalty of two months' rent as stated in the lease? The tenant is requesting the return of their last month's payment and security deposit (equal to one month's rent).

Theresa Harris · Answer

check your local laws and if what you have in the lease doesn't violate the laws, then do it.  It is also your responsibility to try and find a tenant in a timely manner to minimize the vacancy.  So I'd do what Randy said.  As for returning the deposit if there was clean up, hopefully you took photos of the condition of the home once it was vacant and have an itemized bill to present the former tenant.  Also check local laws to find out how much time you have to give them the itemized invoice.

Andrew Syrios · Answer

You will want to check your local and state laws, I do believe some states cap the amount. We have a break lease fee (we operate in Kansas and Missouri) and I know we use a flat fee and not a multiple of the rent (I think because that way the deposit cannot be applied to it or for some reason with local laws, admittedly I don't remember).

The main thing is though that 1) it's in your lease and 2) it's in compliance with your local and state laws. If so, yes you can charge a break lease fee.

Andrew Syrios · Answer

Assuming your local/state laws allow it, I would probably just put in a flat break lease fee that would cover all such expenses. That way, 1) you should get the money up front when they leave instead of having to chase them down for it and 2) it makes the accounting easier and less likely the departing tenant will dispute the charge.

Hanh Hoang · Answer

In our lease agreement we use we put that the tenant if they break the lease are responsible for any marketing cost, tenant placement cost, and other associated cost of replacing the tenant.

Nathan Gesner · Answer

If you have something in your lease agreement, you should understand it and enforce it. Otherwise, it's just words.

1. Check your state law to verify this is allowed. You can try a Google search for "lease termination penalty [STATE]" and read up on it, or consult an attorney.

2. If it's in your lease and the tenant agreed to it, then you should follow it.

3. As Theresa pointed out, the real point of a termination fee is to allow the tenant to break a lease early without negatively impacting your finances. You found a new tenant immediately, so there's no financial loss to you except for the time spent marketing, screening, etc.

I think you should charge a penalty because the tenant did break the contract, resulting in additional risk and work for you. However, I would perhaps charge only one month of rent since you found a new tenant to take over so quickly.

Randall Alan · Answer

@Linda Roberts

You can charge whatever your tenant agreed to in your lease - whether they pay it or not is another story;  or you can try and work with your tenant.

Like you say - the basic goal is not to have any rental gap.  We try and split the difference between what our lease says, which is like yours - "two months rent".   But depending on the nature of your tenant they may just opt to stop paying rent, walk,  and see if you chase after them - to which the usual answer is: it probably isn't worth it.

So what we do is say, "Look - the lease says 2 months -but really we just don't want to be out any rent.  You will remain responsible for the rent for up to 2 months - but what we will do is turn on our marketing, find a new tenant, and as soon as we get them in the unit, you will be off the hook for the balance of the 2 months owed.

If we are given a proper 30 day notice - we can usually have a tenant ready to move in within 2 weeks of the exiting tenant moving out.  So it ends up being a win-win for everyone... we have no rental gap, and the tenant still gets part of the deposits back.  We have gotten good enough at it that it is often just a few days between the move out and move in.

Hope it helps!

Randy

Jake Knight · Answer

Lease agreement should be in accordance with state laws.  Given our location (Indy), we can certainly charge a lease break fee equalivalent to a couple/few months of rent.  That's the important distinction though.  They are not pay three month's of rent but the equivalent to as a penalty.  Just make sure the language of the lease is right so as to not suggest you can double charge rent.

Devon Verno · Answer

Depends on what your state permits. I would recommend that your lease reflect a flat rate fee - for example, my lease states that I need a 30 day written notice if they are moving out while in an active lease, there is a $500 early termination fee, and the tenant is responsible for the rent until a new tenant is secured (this helps to encourage the tenant to leave the property empty and in good repair).

Linda Roberts · Answer

Thanks @Randall Alan In my case, the tenant has already moved out, and I have her last month's rent and security deposit, which together equal the two months of penalty fees. Now, she wants it back. I don't feel obligated to return it to her. Additionally, she left a dozen large garbage bags in the apartment and abandoned furniture and a mattress on the street. We need to deal with all of this, as the garbage collectors won't remove it.

Can I charge for breaking the lease?

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