NEED ADVICE! Tenant trying to get out of lease 2 days before move

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NEED ADVICE! Tenant trying to get out of lease 2 days before move

James Wagner
Wichita Falls, TX · Member since 2016 · 1 post · 0 votes

Fellow Landlords,

My tenants are trying to back out of the lease 2 days before they move in. Any advice would be great. Here's the background:

I have a 1973 SFH in Wichita Falls, TX. 4/2, 2143 sq ft on a corner lot. I am in the Air Force and was recently transferred to North Carolina. We decided to rent the house out because we've owned for 6 years and plan to return to Texas in 2 years.

We put the house on the market in late May and had a 2-year lease signed by June 7th, lease terms from 1 July 2016 - 30 June 2018, $1495/month with a $1495 security deposit. The couple paid the security deposit at the time of application, but we haven't received July's rent yet. Their credit was good, bordering on Excellent. Combined income was $95K annually. The only issue with the background check was the husband tenant had an assault charge 21 years ago, time in county jail, but no prison time.

This afternoon, my property manager called me and told me that the tenants called her today and told her that "they didn't realize their current lease wasn't up until the end of July". They are hoping that I will just cancel the lease and give them their security deposit back.

However, my PM also told me that a different realtor within the same brokerage firm received an email about midnight last night from these tenants inquiring about a different property that is only $1250/month. After my PM spoke to me about it, I told her to call the tenants and see what was going on. After a little prodding, the wife tenant stated that while she likes the house, her husband did not so he was wanting to get out of the lease and was the one inquiring about the other house. I don't know if the information about their current lease not ending until the end of July is true, but I believe it to be a lie. The reason is because at first the wife tenant tried to play it off by telling my PM "I don't know what email you're talking about, it wasn't us". But like I said, after some prodding, she admitted it was her husband that sent he email inquiring about the other house. There is already a level of dishonesty from these tenants and they haven't even moved in.

My wife and I are torn on what to do. I want to hold them to the terms of the lease until we can fill the house with other tenants, but I don't want them to go ahead and move in since we won't let them out of the lease. I would rather just do what my PM suggests and write up an agreement that they can break the lease, but it will cost them their security deposit. Financially, I can handle July's mortgage payment without them paying me July's rent, and without the security deposit, but if I don't have a rent check in August, I'll go into default on my mortgage because I have to pay for the house I'm living in in North Carolina.

Have any of you ever dealt with this? What are my options? What do you suggest we do? Let them out and keep the deposit, or hold their feet to the fire until I get a new tenant in? Like I said, I'm afraid to do the second one because of the dishonesty thus far, I don't want them to "settle" for my house and actually become my tenants for the next 2 years. Any advice would be greatly appreciated!

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  • Stephen E.
    St Thomas, Ontario · Member since 2013 · 575 posts · 408 votes
    10y

    @James Wagner

    Well the first observation is you should not rent out the house if you cannot stand two months of vacancy. You are too under capitalised to be a landlord and should sell ASAP. That is the bottom line.

    The next observation would be that in terms of these tenants, they have signed a lease and are on the hook for rent until you find new tenants to take their place. You can sue for unpaid rent and losses due to vacancy caused by their failing to fulfill the contract. But that would take time and you have no money for mortgage payments. If the place was easy to rent the first time it might be easy to rent the second time. You could advertise like crazy and try and get someone in, while making it clear to the tenants that they are liable for breach of contract. You are obligated to mitigate your loss, and evidence of widespread advertising will demonstrate this to the courts. But if these people are determined to avoid payment (the details given suggest that they are pretty wily) and you are confident you can re-rent the place easily then you might consider some agreement that the security deposit is liquidated damages in terms of their breach of contract and consequent losses to you. Be absolutely sure however that this is drafted in such a way that your property manager is certain that it complies with Texas law. Legal advice would be advisable to avoid comebacks.

    But I have to return to the first observation. Some situations don't lend themselves very well to successful landlording, and yours is such a situation. You can't float the mortgage payment through two months of vacancy. This is not the business for you. Landlording is a risky enterprise and you could well find yourself facing a significant period of vacancy, or costly tenant damages, or perhaps both. Sell this property and get back into landlording when you have enough savings that you have an emergency fund large enough that you don't have to worry about going without rent for two months. Landlording is not for everyone and not for all circumstances. Yours don't fit at present, they might if you saved and accumulated capital such that you could withstand the financial risks of landlording.

    Good luck.

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  • Matt B.
    Investor · Bethlehem, PA · Member since 2016 · 229 posts · 122 votes
    10y

    I would rent it to someone else. these sound like the kind of people u dont want to have to deal with especially while your on the other side of the country. if legal in your area, i would have them pay rent up until the point you have a new tenant in place, or keep their security deposit and call it a day. good luck

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  • Brendan Martin
    Investor · Wichita Falls, TX · Member since 2015 · 13 posts · 9 votes
    10y
    Hey James, I'm not currently a landlord but I do have an interest in becoming one. Which means, take my advice with a grain of salt. I believe if I was in your situation, I would retain the deposit (that's what it's for after all) like your PM suggests and put it back on the market for rent. Based on how quickly you got it under contract in the first place, you will most likely get it rented quickly again. But, do it quickly because you don't want to run out of the Wichita Falls PCS season. Another option of course is to sell. The market here is moving pretty quickly right now. Many houses are getting offers the first week they are on the market. I can recommend an amazing agent if you are interested in selling. Just send me a private message. And no, it's not me ;) Good luck!!
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  • Leland Barrow
    Investor · San Marcos, TX · Member since 2015 · 272 posts · 360 votes
    10y
    Although Stephen's advice is brutally honest I completely agree. It is a bad start to a relationship to have them move in. In my situation I would let them break the lease and give them their money back. In your situation I would force the lease and let it play out even if they move in. If you do end up evicting then you will be up a creek without a paddle. You should have 3-6 months of reserves for every property. Personally I keep 6 months.
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  • Josh C.Pro Member
    Property Manager · Indianapolis, IN · Member since 2010 · 1k+ posts · 1k+ votes
    10y
    100% agree with Stephen E. You need to sell it right away and either buy a cheaper one or save up. 2 months of mortgage is nothing. If your furnace goes out or your tenant doesn't pay rent and trashes the places and that causes you to default you've put yourself in a bad position. You really need to have at least 7k sitting around. Aside from that you don't want someone living there in your property that doesn't want to live there. Personally I'd keep the whole security deposit as liquidated damages. Hopefully your receipt you gave them said non-refundable on it. Our property management company writes in boldly on the receipt we hand tenants. But then sell that place. That's incredibly risky. Foreclosures aren't good for a new investor.
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  • Stephen E.
    St Thomas, Ontario · Member since 2013 · 575 posts · 408 votes
    10y

    @James Wagner  To clarify discussion of liquidated damages above, you could only do this with some form of agreement and you would have to be very careful. Security deposits tend to be heavily regulated. There are posters on the other thread you started with a duplicate post that make this important point. But this is beside the major point - call a realtor and sell quick if you can't withstand a loss of two month's rent. What happens if the tenant decides to stop paying rent and the furnace goes out, and then the tenant leaves the place ravaged with pet damage? These are all common occurrences in landlording. You can't afford them, that much is plain.

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  • Mary lou L.
    Investor · Wichita Falls, TX · Member since 2014 · 382 posts · 123 votes
    10y

     It seems like they want a cheaper place if the other house is 200 less. Since your property manager gave you the advice they can break the lease but you keep the deposit I would do that.  Were there other qualified applicants that may still be interested? 

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