Breaking lease

16 Replies

After using a good 10 hours of my time and having me pull the property off the market for a week a prospective tenant (in Chicago) signs the lease. 2 days later calls back and says he wants all his money back. The start date of the lease was for Nov. 1. He paid first months and deposit. What do I give him back?

I would give him everything back. You may have legal grounds to keep some of it or all of it, but the decent thing would be to give it back to him even though it has been an inconvenience to you.

this prospective tenant most likely caused the landlord to loose rent for one month since it will be very difficult to find a tenant for nov 1 on such a short notice

@Michael Garcia There has to be some penalty for breaking the commitment the tenant made.  I would tell him "I will put the place back on the market and when I locate a qualified tenant, paying equal rent amount, and get a new lease signed under similar or better terms, I will release you from your lease as of the day the new tenant's rent starts." 

But you should have the property on the market ASAP cause one way or another this guy won't work out.  

Don't delay...get some adds out there tonight!!

@Steve R.

Not really true. If advertised now he could get a tenant to start Nov 5th, or 10th or 15th.

There is nothing in the rule book that says a lease has to start on the 1st.  I have many leases that start mid month and the rent is paid then as well. 

@Michael Garcia

Advertise it ASAP is my advice but beware of any one ready to move in within a day or 2. They might be running from something.

 I agree with @Mark Ainley for the rental portion, but I would return the security deposit portion right away.  Because they didn't move in, so they didn't cause any damages.  Potentially additional damages could be if it takes you longer than the one month of rental you have to rent the place, but I'm assuming it shouldn't take that long.

I believe it largely depends on how the lease was written. Was the lease signed?
I always make sure to write into my leases that the deposit may be used by the landlord to cover missed rent.

I agree with @Luke MacLean . My lease clearly states that if the tenant breaks the lease for any reason without a 30 day advanced notice then I keep the security deposit for loss of rent. However, if the security deposit in your lease is strictly for any damage and repairs caused by the tenant then I would give it all back to him since he has never been on the property. 

Even though you may have legal grounds to keep a portion of the money, the headache you will receive will likely outweigh what money you keep. IMO, it's usually best to put up some more ads, and give back the money and move on.

One idea... If you have a basic hourly rate for repairs in you lease, you could charge him for your time of processing the lease, place on market and reshowing the house. 

I also like keeping partial rent until the unit is leased again.

I would process it  out with letter and one check when the unit has a new lease.

Hi @Michael Garcia

I agree with the "Just give it all back and wish him well" crowd.

Since he hasn't moved in you are taking some of a hit but not as much if you tell him you are keeping it and he says "Ya know what? Fine I'll move in then.. we have a lease and all, Hey do you know where a scrap yard that takes copper is by chance?"

In the states that I have invested you are entitled to the full amount of the contract, i.e. all 12 months rent. However, if someone breaks the lease you are obligated to attempt to re-rent it. Thus he is only on the hook, as one poster pointed out, for the rent while it was vacant and any difference in rent. There should not be a difference since the market should not have moved that much, if at all, since he signed. If you do not make a good faith effort to re-rent it then he could sue you to get out of it.

I would weigh all that with the fact that if you attempt to hold him accountable, he may just move in. At a glance that is something I would seek to avoid at this point. Perhaps explain to him his potential obligations, the damages he has caused (lost rent by delaying your ability to rent) and come to some equitable settlement. It might not make you 100% whole, but it is better than nothing and may be better than dealing with this guy any longer. Be sure to get any settlement in writing. This all assumes that the lease and laws where you are support this course of action.

Question is:  Did the tenant sign the lease, pay the 1st months rent and the security.  If so, then he is bound to the lease.

As "mitigated damages" for not moving in, I would refund the rent but keep the security deposit (whichever is smallest).

Seven Months Later... I believe the answer is to never let someone like this move in. Why? Well this guy moved in and payed 3 months rent on time. I thought everything was good till he moved out and left his girlfriend in the property. At the time I was on Paternity leave and wasn't in a position to loose the rent. Plus, loose lawyers fees to evict his girlfriend, who was mentioned in the lease as an occupant, so when she offered to pay $1200 of the $1500 rent I reluctantly accepted. But accepted all the same. She decided not to pay this month and now I'm going to have to evict her. Oh happy day LOL. This goes to the newbies. Listen to the experianced investors. It always pays off. It's better to struggle and have an empty unit then to put the wrong person into your building. A lesson I won't forget. I was entitled to the whole security and lost rent but it was not worth having someone with low integrity in my building. I should've came up with the amount of money that would've kept him from moving in but allowed me to keep him from moving in even if that amount was nothing. Funny I asked this question 7 months ago but was too busy to read all the great answers that came from it. Thanks to all that replied. Great advise.

Also, anyone 18 years or older must be listed on the lease as a tenant, not occupant. We all learn hard lessons at some point, @Michael Garcia ! Now you have the personal experience to help you in the future.