Tenant wants to break lease and has a friend to inherit lease...

28 Replies

So I got a phone call from a tenant who is six months into a one year lease, she is moving in with a boy friend.

Lease has an early termination fee of two month's rent. I am holding a security deposit and last month's rent totally two month's worth of rent.

Now, she said she has a buddy who would love to move into her place, and is ready to move whenever she moves out, even same day.  Her "buddy" is willing to sign a lease for the balance of the lease term, or a new one year lease.  She wants me to waive the early termination fee because she found a replacement tenant.

Now, I said I am glad you found a candidate, but there is no way I can turn around and rent to her the same day.  I need to go through the entire apartment and evaluate what needs to be cleaned and repaired after she moves out.  I need to screen the new tenant.  I may raise rent.  I may have to repaint and/or change out the blinds.  If all that takes two weeks then she is responsible for the two weeks of lost rent.

What is your experience with a replacement tenant recommended by a tenant breaking a lease?  Good idea?  Bad idea?  Anything I should watch out for?

You should definitely consider speaking with a local attorney before refusing to return a security deposit. In general, regardless of what terms you have in your contract, courts may overrule the contract for public policy reasons. 

In general, fees are not supposed to be arbitrary, they need to have some basis in actual costs rather than as a penalty for leaving early, landlords also have a responsibility to make reasonable efforts to find a new tenant once they have given you sufficient notice. 

Additionally, courts in many states do not like landlords playing games with security deposits and if they determine you have wrongfully withheld SD money, they will make you pay the tenant 2 to 3 times what you should have returned to them in the first place.

This is not to say that you cannot have a justified reason for refusing the new tenant, or keeping the SD, you just want to be very careful and talk with an attorney.

While I agree with treating it as a new tenant in terms of screening, new lease agreement, new deposits, etc.  it does not have to take two weeks to turn the apartment and many of the items can even be performed with the old tenant still in place (i.e. screening, background check, etc).

It is not worth making this a difficult process especially if the replacement tenant is acceptable.

If this is in Florida, then I would look at this way.

The landlord has an obligation to rent the empty property (from a broken lease) as quickly as possible. This is state law.

But what you are suggesting is having the property empty, so you are forcing the property into "out of service". You are then going to use the tenants deposit and advanced rent, whilst the property is "out of service" to complete your checks.

I do not believe that this would not be acceptable if you were hauled up on it if the outgoing tenant took this further.

The tenant is giving you an option to keep the property "in service", and you have an obligation to go down that route, qualify the new tenant, and hand the property to the new tenant, to keep your losses as low as possible, and to keep your claim on the outgoing tenant as low as possible. 

Updated over 4 years ago

"Not acceptable". Managed to get a double negative in the sentence whilst editing.

Screen the friend as though they walked in off the street.  Treat the new tenant as new and separate.

Don't try to make that extra fee just for the sake of the fee, though. If the friend meets your criteria, the tenant just saved you the marketing time and money. The new one might even move in as-is, which would save the cleaning and repair costs.  BUT ONLY IF they meet your screening criteria.  That's my 2-cents worth.

Depending on the state and in some cases even the city, you may have different requirements.  If the two months rent is standard for your area that's great.  If not, beware and as Jason said, check with your lawyer.

I typically have a 1 month in lieu of notice clause, or sometimes even the tenant is responsible for all rent until the unit is re-rented.

@Jason - It's nice to invest in a landlord-friendly state!  Here in Texas, it can vary by town.  Dallas is pretty renter-friendly.  Fort Worth is more landlord-friendly. I've heard Austin can be rough, but most of the state is neutral.  A common eviction hearing has the judge ask the tenant "did you pay or not" and ruling against them unless there are some very exceptional conditions.  That is, unless the landlord did something they should not have, like changing the locks or cutting the utilities, or not giving proper notice.

Just to be clear.  I am not suggesting to charge the full 2 month early termination fee.  If I get it rented in two weeks, the most I can charge the former tenant is the two weeks that it's out of service.

Obviously the friend would be screened just like any other applicant.  Minimum income, rental history, credit check, employment verification etc...The benefit is I don't need to put up an ad, and show the apartment multiple times.  The down side is I am not selecting the best qualified person from a pool of applicants.

The issue is I don't want to commit a move in date until the tenant is out.  I really can't evaluate everything until the unit is vacant.  I can evaluate some of it, but often times I don't see a spot on the wall to be patched and painted until the couch is out of the way, or a broken shelf in the fridge until all the junk has been removed.  And if you have already promised and signed off a new lease with a move in date of that same day, you paint yourself into a corner unless the new tenant accepts those pre-existing defects in order to move in early.

It comes back to damages.

Everyone thinks that damages can be added to just about anything, but damages have to be a real loss. If you trip over your shoes laces, you can't sue the shoe lace manufacturer for damages unless you have real damages, like you knocked out your tooth.

You also have to show mitigation against your own damages. You do this by tying your shoe laces in the first place. You can't leave them unlaced, trip over them, and sue for non existent damages.

With that in mind, when your lease is being broken, you are obliged under FL law to keep this to a min. Essentially, the damage is the broken contract and unpaid rent, but you have to show mitigation by getting it rented again.

By taking it out of service, you are not mitigating your damages if you've refused another tenant, even if it's just for two weeks.

If your tenant is working to minimize the damages, the least you can do is play along.

There are a lot worse situations to be in than a tenant trying to find you a new tenant so they can break the lease and move on. 

Also, I wouldn't be too worried about the dates either. If the tenant is moving out to move in with someone else, and they are arranging a new tenant for that date, then things look pretty good from here.

Simply run your screening, and run the dates back to back.

If I am forced to run the dates back to back, and the tenants (former and new) being friends, decided to blur the move out move in dates in that one decides to move things in before the other moves out.  I may not be able to inspect the apartment in a full vacant state.  Hypothetically speaking if I miss a big hole behind a dresser, wouldn't the new tenant inherit the damages of the former tenant?

Screen the new tenant as you normally would.

If they qualify: Offer the apartment "as is" to the new tenant. Walk through as your current tenant is leaving. Make sure your current tenant knows that the new tenant either accepts the apartment in its current condition or she will be charged rent until you make it ready.

Hopefully she leaves it in good enough condition and the new tenant is fine with it. Document the condition on the day she moves out so you know what not to hold the new tenant responsible for.

Don't require the place to be absolutely perfect! If you have a new tenant ready to go in as-is condition and they qualify, just go with it! Much less work and vacancy for you.

I once lived in a house rented to 4 guys at a time. We were all church friends and the house was occupied for over 7 years. The rent rarely changed but there must have been over a dozen church friends moving in and out over that 7 year time, as it was a single guy household, many of us got married and other singles from church came and took over rent payments. As long as the rent got paid in full and on time we didn't have a problem.

The property management company wasn't very good, but they just said as long as the deposit goes toward fixing up the place after you all move out it's fine. We paid every month on time, on a month to month basis, and the owner never had to pay for renovation, marketing, or vacancy over those 7 years.

Given, that's probably really rare and hard to get.

I would factor in the price of marketing and vacancy over the year if you don't accept this new guy. If it takes a month or two to get a new tenant and you have to market it, that would eat up that fee pretty quick. Seems like the new guy is a easy fix. Perhaps you could have him sign a contract saying the deposit will have to include damages from the previous lease as he is taking over responsibility for it.

@Sam Leon it is actually great she found a new tenant for you and back-to-back means less work and no loss of income. There is some risk, but if you manage it properly, this seems good for you.

First thing I would do is thank her for finding someone new and explain you need to process their application before you can make any commitment.

Find out if her friend has to move in the day she moves out or is it possible for her to move out and give 1-2 days in-between. That would give you time to do a proper walkthrough and document the condition. One concern is that when the new tenant moves out, they argue damage was pre-existing from their friend. Having time in-between to document condition is critical. Even having two hours empty would be enough to take pictures and note condition. You can also do a pre-walk through to gauge condition.

If you don't have time to fix something, either fix it after the new tenant moves in or document condition for when the new tenant moves out.

If you approve the application, just make it clear to her that her deposit will be returned based on the condition of the property and is subject to the new tenant taking possession as agreed. I would tell her she is responsible for any vacancy. You don't need to threaten her with taking her security deposit, but in most states security deposit can be used to satisfy rents owed, so that is implied.

I have had several tenants break leases. I tell them they are responsible for full rent until I get it re-rented. I ask them to clean and keep the property in great condition to helm me get it rented quickly. Usually they will work with me and I have never had a property sit more than a month. I have had tenants offer two months rent to walk away, but if I rent it sooner than that, I refund the difference back to the old tenant. It is not legal to double-dip rent in most states.

One time I had a tenant break a lease and she told me her sister would like the place. The tenant was great and her sister seemed nice. Then I found out her sister was in an abusive relationship and her boyfriend had recently been in jail for beating her, but he has changed... My "great tenant" left out the detail of the abusive boyfriend. I don't rent to wife beaters and I was shocked her sister didn't understand. The point is never trust your tenant to select a new tenant. Do all your standard verifications.

You are right to be skeptical. As an experience property manager, I would not agree to your tenants proposal, for the your very valid points that you made on proper move-out protocol. I would suggest that you collect the replacement tenants application while the current is still occupying the unit. If the new tenant meets you criteria, proceed to make arrangements with the current tenant to do a walk-thru/ assessment (while occupied), have her prepay prorated rent for the time that she'll be occupying the unit until move-out.

Also, I would withhold only 1 month of the two months rent deposit for breaking the lease and agree to refund the the other months rent  (for finding you another qualified to tenant) if there are no damages beyond normal wear and tear, and all monies, prorates etc.. are paid. Ok Sam, that's just my two cents. Good luck dear!

@Aset Falore in your experience is it legal to withhold one months rent if the property has been rerented? My understanding was that if you cannot double charge rent, so if she is paid up through May 30th and someone moves in on May 28th, you must refund two days rent to the old tenant.

I would screen the new tenant to be sure they pass all of your requirements.  Then and only then...  If the new tenant passes all requirements I would refund the previous tenants deposit and take a new deposit from the new tenant. 

As far as the lease goes, I would draw up an addendum to the lease to transfer responsibilities from first tenant to second tenant for the remainder of the lease.  With this option, I wouldn't bother with a turnover cleanup ect...  they are accepting the previous tenants damages ect....  and should be spelled out in the addendum.

A second option is to terminate the first lease and create a new 1 year lease with the new tenant.  Rent could be adjusted to market rent and would treat the cleanup just as any other tenant turnover with move out checklist and move in checklist ect.

I would not penalize the old tenant, due to the circumstances and the fact that they did get you another qualified tenant.  

Just my opinion.  Take it with a grain of salt.

Hope this helps.

Jeff V

Step 1) Follow the lease/law move out requirements and collect the 2 months penalty for early termination.    Congratulate her on her future plans.   

Step 2) Market the property for lease.   Hopefully her buddy gets to move in.   

Keep it simple:)

Your lease states she has to pay the early termination fee so I wouldn't deviate from that.  If the friend really wants to rent the apartment then they will wait until you clean the place up.  If not, you have a clean apartment to rent out again.

I would not blindly let someone's buddy take over a lease.  No way.

I should add that subleasing means that she's renting to the new tenant. She can collect a security deposit from the new tenant, you still deal with her, not the new tenant. She's still on the hook as far as repairs and rent go, etc. You'll want to qualify the new sub-tenant as normal, but you won't need to inspect or make repairs because you'll still hold on to the original tenant's deposit. The original tenant is liable for the damages her or her buddy caused. 

Unless the rent is under market and you'd rather have her out because you could get more easily. If that's the case, just let her out without worrying about the 2 month lease break fee and re-rent it at a higher amount -- you're getting something, she's getting something, and you don't need to worry about training her to break your lease clauses because you aren't renting to her anymore.

@Sam Leon In my experience, it can get ugly fast. I've had a tenant who found a gentlemen to take over her apartment and sign a new lease. She subsequently signed a new lease elsewhere, and was extremely mad when the gentlemen backed out. All in all, she was rent responsible for about 3 weeks as the unit was turned, marketed, and filled. The max lease break fee we charge is one month's rent, so she saved herself a week, but at 2400 a month, she felt the pain. 

I would recommend to not try and do anyone a favor. Tenants soon forget that you're doing them a favor and they hold you accountable for their mistakes. Hold the tenant to the rules you've laid out and they can make their decision accordingly. 

I try and keep in mind though that the tenant breaking the lease is essentially lessening my turnover costs since they are still rent responsible and rents can be increased (assuming your market will bear it).

Hope this helps!

Kenneth R. Reimer

When I was a tenant I had to terminate a lease because I had bought a house. What we did was pay the property manager the 500 fee to find a new renter and pay a month in advance to get out before the new tenant moved in.