NEED ADVICE! Tenants breaking lease 2 days before move in

Realtor · Cumming, GA · Member since 2013 · 27 posts · 11 votes

Hello, I am no expert but I would suggest on holding onto the security deposit and letting them out of the agreement with no refund. I say this because you don't want disgruntled tenants in your house destroying your property .

6 Reply

Stephen E.

St Thomas, Ontario · Member since 2013 · 575 posts · 408 votes

10y

@James Wagner

This is a double posting, I just responded to your most recent duplicate post. I hope that the response is helpful to you.

0 Reply

Sloane Rowan

Investor · Charlotte, NC · Member since 2016 · 35 posts · 14 votes

10y

That is a tough situation but if it were me I would keep the security and let them out and try to offer an incentive in order to get a new tenant in ASAP. Something like " $250.00 off the first month if rented by 7.15..etc.

I agree with not wanting to be locked in for 2 years with tenants who don't want to be there.

Keep us posted

0 Reply

Eric M.

Investor · Weston, WI · Member since 2016 · 105 posts · 114 votes

10y

It looks like everyone is stating that you should keep their security deposit. I would make sure to check your local laws on this. There are often only very specific circumstances where you can keep a deposit, and sometimes there are triple damages to pay if you withhold it illegally.

4 Reply

Samantha Klein

Investor · Monroe, WI · Member since 2015 · 691 posts · 610 votes

10y

It also sounds like you should have a bigger emergency fund if you don't have enough money to pay your mortgage if you had a 2 month vacancy. I always keep a year of mortgage payments in the bank in a separate account in case of a long vacancy.

3 Reply

Gabe S.

Vienna, VA · Member since 2015 · 41 posts · 15 votes

10y

I never want a tenant in my prop that doesn't want to be there. I would let them leave. But keep the deposit.

0 Reply

Yvette M.

Reno, NV · Member since 2016 · 328 posts · 97 votes

10y

Start marketing and try to re-rent ASAP. As far as the security deposit you may be only allowed to keep the actual cost of marketing and lost rent until you find a new tenant.

1 Reply

Thomas S.

Member since 2016 · 13k+ posts · 12k+ votes

10y

Obviously hold the security if legally allowed, it is under most jurisdictions, and market again for August. No discount necessary just market as usual and you will find a tenant.

Good luck

0 Reply

James K.

San Diego, CA · Member since 2014 · 48 posts · 22 votes

10y

So they are dishonest AND don't want to be in your property. I would definitely not try to make them honor their contract. If breaking the contract is grounds for keeping the deposit, I would definitely do that as well.

1 Reply

Kelsey Mondelli

Real Estate Agent · Langhorne, PA · Member since 2016 · 2 posts · 2 votes

10y

This is a tricky situation, but I suggest keeping the security deposit and letting them go. Security deposits are there for situations like this. You do not want to have potential untrustworthy tenants living in your home. Offer some sort of incentive too to the new tenant like a "discount" on the first months rent if rented by a certain date to get someone in there as soon as possible. Best of Luck!

1 Reply

Lauren H.

Investor · Colorado Springs, CO · Member since 2014 · 77 posts · 54 votes

10y

Check your lease. Check your local laws. I know what my lease says and I know it complies with local law. If you can rewrite the lease to further protect yourself from this situation in the future while complying with local law, you should do it and consider this a learning experience.

0 Reply

Robert Melcher

Residential Real Estate Broker · San Antonio, TX · Member since 2016 · 506 posts · 311 votes

10y

Start the clock on the security deposit accounting from the day they do not take possession. You have 30 days to complete the accounting and provide a statement of charges.

Since they are not taking possession, immediately work on getting a new tenant.

If a new tenant moves in before the end of July, prorate the daily rent to return only the portion where it is occupied by the new tenant. If utilities and lawn care are included in their lease responsibilities, I would also charge them for these expenses up to the day it is rented.

Mail the accounting certified/return receipt by the 30th day to their last know address, and keep it in your files if it is returned. You can mail a corrected version if the house remains vacant longer, or mail them the right one when the call. They are responsible for these things until the house leases, but you have to work to get it leased.

5 Reply

Robert Melcher

Residential Real Estate Broker · San Antonio, TX · Member since 2016 · 506 posts · 311 votes

10y

Doesn't your PM handle these things for you?

0 Reply

Joe SplitrockPro Member

Moderator

Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes

10y

@James Wagner I would let the PM know that these people are responsible for all charges until you rerent the property. That includes rent and utilities. Ask for something in writing from the tenants that states they do not plan to occupy the property and provide something in writing to them with your expectation that they are responsible for all expenses until it is rerented. Then based on that agreement you will let them out of the lease. Make it clear that the security deposit will be withheld to cover these expenses and you will be billing them for anything exceeding those charges. You also need to find out what the PM is expecting for compensation - hopefully nothing given the situation.

Hold on to any proof you have of them lying because if this goes to court, it will help your case. It speaks to the general character of the tenants being dishonest people.

3 Reply

Jason Hirko

Lender · San Antonio, TX · Member since 2016 · 1k+ posts · 1k+ votes

10y

Originally posted by @Robert Melcher:

Doesn't your PM handle these things for you?

My thought exactly. I would call the PM and say 'Look, I'm paying you x% to have this place rented out to quality tenants. This is not what I expect. Please take care of this problem and get good renters in there ASAP'

1 Reply

James Wagner

OP

Wichita Falls, TX · Member since 2016 · 6 posts · 1 vote

10y

My PM is handing it, but this is my home not just an investment property so I'm as involved as I can be from half a country away. She's doing all the work, I'm just the final decision on most things. Thanks everyone for your advice.

0 Reply

Mark Anderson

Investor · Greensboro, NC · Member since 2015 · 2 posts · 1 vote

10y

I'm pretty sure being in the military there are certain programs that you bank offers allowing you to postpone payments as active military. I wily check with your bank and CO. When I was in the military in 2001 in pretty sure if a transfer was temporary there were certain programs that could offer assistance being active military. I don't know something to check into.

1 Reply

Aubrey Ventittelli

Phoenix, AZ · Member since 2016 · 9 posts · 7 votes

10y

Hi there James, I think Joe Splitrock and Robert Melcher said it best. No need for me to rewrite their response but like most others have said it's very important that you as a landlord are aware of all the details of your lease agreement and the Landlord tenant laws in your area. I've been a property manager in AZ for a number of years and holding the security to cover the potential expenses for them not meeting the terms of the lease agreement is defensible here. Your manager should be re-marketing the property right this minute and yes if you are afraid you weren't getting a lot of traffic before then you should be providing some type of incentive (lower price or move in special) to get more interest and get qualified tenants fighting over your property. I only say this because your scenario made it clear these folks were willing to try and break an agreement for a more affordable property. Last it's usually my recommendation to clients to always start with a one year lease. Sure it depends on your situation but the seeming security you have from a tenant locked in can turn on you when you discover they aren't as great as they looked on paper. There's no reason you can't just renew someone for a longer term if they take great care of the property.

1 Reply

David Zheng

Investor · Saint Louis, MO · Member since 2016 · 970 posts · 1k+ votes

10y

Keep that deposit. That is what it is for. plus you don't want these crappy tenants to think they can just go around slinging safety deposits to any landlord and getting them back whenever they want.

also future reference...theres a reason lenders always ask for 6 months worth of escrow and mortgage payments in reserves...if you only have one months worth of mortgage payments before you default, you need to start saving more.

good luck

0 Reply

Mike Hanneman

Investor · Coeur d'Alene, ID · Member since 2016 · 551 posts · 218 votes

10y

For furture reference, you need to call this a "Deposit to Hold" then in the receipt that you or the PM sign along with the tenant/applicant say it transfers to security deposit after the successful signing of a lease.

0 Reply

James DeRoest

Investor · Century, FL · Member since 2015 · 950 posts · 603 votes

10y

Originally posted by @David Zheng:

also future reference...theres a reason lenders always ask for 6 months worth of escrow and mortgage payments in reserves...if you only have one months worth of mortgage payments before you default, you need to start saving more.

Err, no they don't.

We're back to the bad old days of lending. Got a pulse? Here's some money.

0 Reply

Account Closed

San Jose, CA · Member since 2015 · 4k+ posts · 3k+ votes

10y

Originally posted by @James Wagner:

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!

Hi James. This Texas Tenant organization discusses what a tenant's rights are if they break a lease:

http://texastenant.org/security_deposit.html

I says if your lease has a clause regarding a re-letting fee, and they break the lease before moving in, you can charge them that fee. So, first see if there is such a clause in your lease.

If not, then you can charge them your actual costs for finding a new tenant, and charge them rent until you find a new tenant.

It's my opinion that if they decide to move in - that you should let them. You're not in a financial position to let them off the hook. They met your criteria, so they shouldn't do any damage, etc. Yes, they may end up breaking the lease anyway, but you can deal with it when it happens.

Don't be amazed that tenants lie. I'm assuming the info that was gathered regarding screening them didn't show any lies. Those are the ones that count. When tenants are trying to get out of contracts, etc., they often will lie some. When they don't want to deal with cleaning their house first, they may delay calling you to fix something and lie about when it really happened. I don't consider those major.

At any rate, I think you should take a deep breath and not worry about them moving in. But, I also don't think you should let them out of the lease without getting all the money you legally can. You can't afford not to.

So, 1) check the lease for a termination or reletting fee. If so, you probably can only charge them that and no more. Oh, and they need to officially break their lease in writing or they're you're tenants.

2) if there's no reletting fee in the lease, then charge them rent out of their deposit until you get a new tenant, and any other costs involved in getting a new tenant.

3) In 30 days, you have to send them an accounting of what you did with their deposit money, with any refund that's left.

I think the way the management dealt with this gossipy stuff regarding emails, etc., was unprofessional. Until they officially break their lease, they're your tenants. But, the gossipy behavior and asking the tenants if one of them sent the email, etc., was really immature, in my opinion. You deal with something real if/when it happens. And so far, the only real thing that's happened, is a tenant asked if they could break the lease without consequence. And the answer is no.

1 Reply

Kenneth HynesPro Member

Rental Property Investor · Easton, PA · Member since 2013 · 359 posts · 92 votes

10y

@James Wagner

Some excellent advice from Robert and Sue on how to handle the security deposit and tenants. I would second the idea that you are not getting good service from your PM. They should be on top off what happens when tenants breaks the lease, tenants rights and LL rights and already explained that to you.

0 Reply

Dick RosenPro Member

Property Manager · Gilbert, AZ · Member since 2009 · 1k+ posts · 451 votes

10y

As PM myself, and this is all hindsight for you I'm sure but this is what I do. The lease states that the deposit and first months rent are due and I do not sign the lease until it's completely funded so they don't have an executed lease until I'm funded. Option if they want to pay the deposit to hold the property, they get a receipt that specially states that if they do not follow through I keep the deposit as loss time on market. Third, I push to collect it all before I sign the lease or take it off the market, if someone else comes along with a signed and funded lease, I will refund the first one because I had no lost time on market.

2 Reply

Account Closed

San Jose, CA · Member since 2015 · 4k+ posts · 3k+ votes

10y

Originally posted by @Dick Rosen:

As PM myself, and this is all hindsight for you I'm sure but this is what I do. The lease states that the deposit and first months rent are due and I do not sign the lease until it's completely funded so they don't have an executed lease until I'm funded. Option if they want to pay the deposit to hold the property, they get a receipt that specially states that if they do not follow through I keep the deposit as loss time on market. Third, I push to collect it all before I sign the lease or take it off the market, if someone else comes along with a signed and funded lease, I will refund the first one because I had no lost time on market.

Dick, this is brilliant, because you have more money to handle a lease break this way - with not only the deposit money, but the first month's rent. At least the landlord here does have the deposit. Hopefully, that will be enough.

If the PM in this scenario gets another fee for finding the next tenant, it would explain why they are promoting the drama and the idea that these tenants should be gotten rid of, even if they say they are willing, after all, to go through with their contract if they aren't allowed to get out of it without penalty.

Unfortunately, so many PMs profit from problems, and so they can be tempted to actually incite them.

1 Reply

NEED ADVICE! Tenants breaking lease 2 days before move in

NEED ADVICE! Tenants breaking lease 2 days before move in

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