Tenant wants "Lease Buy-Out". How to respond?

Question

Current lease by three tenants (joint and several)  ends May '17. One tenant wants to leave sooner and he offered me a deal he calls "lease buy-out". Instead of him finding a suitable replacement (which I had agreed) he offered to pay 3 months of rent (his part) if I take the responsibility to find a replacement. On one hand, I want to help him out and the extra payments will cover possible delays in finding a replacement. However, there is this hassle of finding  a tenant that pass my checks and also is acceptable to other two. Any thoughts ?

Account Closed · Answer

I don't understand the situation completely.  Are you one of the three tenants?

Manoj N. · Answer

Senthil - thanks for your insights. Yes, making sure the other two tenants accept a new one is important. I also like the idea of adding lease buy out to the lease text.

Senthil N. · Answer

@Navin Naik, your tenant is being reasonable.

Hassle? Tenants leaving and replacing them is of course work every land lord wants to avoid.  But hassle?  This is part of being a land lord.  Talk to the other two tenants and make this offer contingent on them agreeing to a 3rd tenant in the said period.  Otherwise they may have to split the rent after the 3 months.  Now, don't word it like I said it!  If they are free to refuse every room-mate then they will!  So, don't keep that option open for the remaining tenants.  Better yet, ask them for the preference but give them no option to refuse.  In which case, they are not liable for extra rent after three months, even if you have not found a suitable room-mate.

If I were you I would start marketing right away and replace room-mate.  I get an additional month of rent for free (3 months / 3) if I can find a replacement that quickly.  So the hassle turns into cash!

Jeff F. · Answer

Are the other 2 planning on vacating in 3 months? Could you take the cash and ask if they know anyone who would like to move in? That way you'd get someone suitable to them that would then just need to pass your checks. I

Jennifer L. · Answer

@Navin Naik I have a buy out clause added to my lease.  It is a clause that can be exercised by either party, but you must give 60 days written notice and equivalent of two months rent.  I think 3 months rent is fair.

Gail K. · Answer

A buy out added to a lease can be useful.  Your tenant is being generous offering the 3 month pay out.  Since the "general" rule is that a court will give a landlord 2 months to find a replacement when a tenant breaks a lease early, most lease breaking clauses require something along 2 months worth of rent.

Ours says 30 day notice plus 2 months rent.

If your tenant simply up and left you'd still be stuck with the hassle of finding a tenant that meets your requirements and is also acceptable to the other two tenants.

Gail