Tenant Breaking Lease

20 Replies

I finally have an issue......

So tenant X in my duplex notifies me today that he needs to move out of state to follow his company that is relocating; his lease is through April 2017. X has paid rent consistently since the beg of the lease and is currently paid up through Nov.I have one month's rent as a security deposit and according to my lease I can keep the deposit since he's breaking the terms of the signed lease.

I feel best case scenario is I keep the deposit and have X move-out in Nov and try like heck to find a new tenant ASAP.

Curious to know how fellow BP members would handle said situation? What am I missing if anything??

@Chris Khouri  I had this situation about a year ago.  In my lease, the tenant has 2 options.  Pay a fee of 2 months rent and forfeit their security deposit or THEY have to find an acceptable tenant (meet my standards) to take over the lease.  If they have a good job and credit score, you could sue.  However that will take time, money and effort so I wouldn't go that route unless I thought I could win and it was for substantial amount of money.  Often, if a company is relocating an employee, they will buy out the lease or pay for expenses for the employee to break the lease.  

@Christian Bors thanks!!

will talk to X about speaking to his employer

like your first option, something I'll put in my lease going forward!

Get into the unit to see what work you will need to do to get it rent-ready again. Wish the good tenant well on his move. Ask if he can refer someone. Let him know you will need to enforce the lease for the remaining months, unless you are able to fill the vacancy. Post your ad and spbegin showing the unit. Ask God to bring you another great tenant. 

Make sure he pays all,water/sewer bills before he leaves, as these are lienable in PA.

@Tim Sabo mind elaborating on "let X know you will need to enforce the lease for the remaining months" - are you saying X should continue to pay rent for the remainder of the lease?

yes. You signed a contract with him in which he agreed to pay rent for a certain period at a certain price. He is breaking that contract, which you can enforce, and receive payment for the remaining months. If he can help you fill it, you can tear it up and forget filing a judgment against him for the rest. Contracts get broken in this business and its your job to get paid for services you offered.

@Chris Khouri

I would let the tenant know that you will enforce the terms of the lease if the unit goes vacant, which means either he or his company pays the rent through the duration of the lease until a suitable tenant can take his place. This will serve as an incentive to him to help you in any way possible to find a qualified tenant such as:

- allowing you to show the place multiple times when you have a good prospect AND keep it neat and tidy so it is aesthetically appealing.

-Alert friends, co-workers or family about the availability of the unit

- His ability to get future housing can depend on how he left his last landlord - which is you. Property management companies often ask on their landlord verification forms if the tenant broke the lease or left the unit owing money. It would bode better for him if he honored the terms of the lease until you can relet it.

Don't be so eager to  release the tenant from his obligation to you. You'd be surprised how helpful a tenant can be when their own dollars are on the line. 

Good luck!

I agree.  I tell my tenants who want out early that they can get out of the lease when I have a new tenant who meets my standards.  The tenants moving out are very helpful in getting the place rented again.  They keep it clean and never complain when I show it.  The middle of winter can be a very bad to lease in my area.  No one wants to move in 30 degrees below zero.

@Chris Khouri There is some brave talk here about enforcing the lease but the key phrase in your post is that the tenant is moving out of state. Say that you take the tenant to Small Claims court for breach of contract and receive a judgment in your favour. The tenant then refuses to pay. How do you collect? How would you garnish income or property (bank account, etc.) if they are out of state, potentially far away? This is a problem. Your best option might be to send the account to collections. Then they would have both a court judgment and collections on their record. This would show up on future credit checks, warning a future landlord. But that does not get you your money.

Your best bet is to advertise like crazy and try to find a new tenant ASAP. You are lucky you have a deposit on hand and may potentially keep it. Your lease says you can keep the deposit in case of the tenant breaking the lease, but is this consistent with the provisions of landlord and tenant law in Utah? State law will override any language in your lease. So while you may be able to keep the deposit this is not the primary source of relief for your problem. You need a new tenant, now. So you are right, you have to try like heck to find one.

The moral of the story is that tenants leave when they want to and when their life circumstances change. You can try to enforce the lease but it can get messy in a hurry. The best remedy is to have a new tenant in place. This is the most practical response. I am not saying you can't try other things as well, just that you have to be mindful of the practicalities before you go down the rabbit hole.

@Chris Khouri ,

If you follow the advice that there is nothing you can do and you just have to accept it, then honestly there is zero reason to ever put someone under a year long lease again. Just rent month to month and be done with it. A year long lease protects the tenant. The single thing in the lease that is a positive for the landlord is the fact that they will be renting for a year. You are prevented from raising the rent, you are prevented from moving them out because you want someone else, you are required to maintain the place. They are required to pay XYZ rent for X amount of time. If you just ignore that part and do not even try and minimize your losses, then there is no reason for a lease on your end.

I can't speak to what your lease says or your state laws, however I would get a firm move out date in writing, I would let them know that they are responsible for the rent until it is rented out again. Then I would try like crazy to get it rented with their help (allowing showings etc, if not they are still liable).

Just my 2 cents and best of luck

I agree with those, who recommend you to start looking for a new tenant asap. Yes, you can keep the security deposit. However, if your tenant manages to find a subletter or you are able to find another renter immediately, your current tenant will be owed the return of your security deposit. But check your lease, it may state that that breaking the tenancy results in loss of deposit.

Hey @Chris Khouri

One strategy is to let them leave and start marketing the property, but let them know that they are responsible for rent until you find a new tenant. Then let them know that they will also pay 33% of the rent for the months that the new tenant took from them as a releasing fee. 

That can be added to the lease as an amendment in PA. Check to make sure you don't violate any of your local laws, but that's a good way to let them out, but still collect what you were due. 

In the future have an Early Lease Termination Fee written into your lease.  It is a one time fee usually equivalent to 2 months rent and by paying said fee they are let out of the lease, but they need to give you 30-45 days notice they will be exercising that option.

It just helps for when situations like this come up, takes the emotion out of it.

This is very simple.  You have a cooperative tenant that has a very legitimate reason for breaking their lease. I'm not sure why we're talking about lawsuits and all of that.

Go to your tenant a present two options:

  • Enforcing the lease, which means that you will help the tenant market the property and the tenant is on the hook for rents until the property is re-rented.  Normal security deposit rules apply.  (Tenant takes the risk of re-renting the property).  Because of this possibility, in our lease we have an assignment clause that allows the tenant to find a replacement but assesses a fee for our additional administrative costs for processing the turnover.  
  • As @Christian Bors suggested, offer the tenant a lease buy out equal to two months rent and their done.  Normal security deposit rules apply.  (You take the risk of re-renting the property)

We usually favor the latter because if you are in a decent rental market and can re-lease in a couple of weeks you just made an extra six weeks of rent.  This is not charging double rents because the lease buy out is not rent.

Unless this property is in Vernal, you should be able to lease it pretty quickly in this market.

Good luck.

I currently rent. If I buy myself a house and move out early the landlord will just keep the security deposit ($1300). Seems like a raw deal for me but it also seems like a decent deal for the landlord. Seems like keeping the security deposit is the best a landlord can do in a situation like this. 

@Andre M.

Land lord can hold you to the terms of the lease so isn't limited to security deposit.

I have found lease buy out. mutual termination agreement the best route.

The land lord holds the ball in this court, and fair is fair. the tenant should be penalized for not living up to the terms of the contract. The option of the buyout, termination agreement gives a good way to resolve the situation and move on.

I agree in this situation if the guys is moving out of state I'd push for him to sign a buyout. hard to take to court if he's not around.

And life is life we can work with our tenants and should have stop gaps that address this type of situation, but it doesn't mean we have to be push overs and  not be compensated.

Usually fee for mutual termination is 2 months rent and your return deposit if apartment is in good condition per the walk thru. You are permitted to show the unit as soon as the agreement is signed. 

If your lease doesn't have a buy out / mutual termination clause, you can still present it. 

Check your state laws and see how it relates to this also. 

Originally posted by @Christian Bors :

@Chris Khouri  I had this situation about a year ago.  In my lease, the tenant has 2 options.  Pay a fee of 2 months rent and forfeit their security deposit or THEY have to find an acceptable tenant (meet my standards) to take over the lease.  If they have a good job and credit score, you could sue.  However that will take time, money and effort so I wouldn't go that route unless I thought I could win and it was for substantial amount of money.  Often, if a company is relocating an employee, they will buy out the lease or pay for expenses for the employee to break the lease.  

 This is true, my company will pay for my lease up to 3 or 4 months upon relocation. You should follow up with your tenant and have him ask his employer this ASAP as you're also looking for other options. 

update:

I contacted X asking if the company X is following out of state will assist with the lease that is signed with me

assuming that X receives no assistance I will ask for a "buy-out fee" of 2 months rent, keep Nov rent that is already paid and hopefully be in a position to return the security deposit once X has a new address

I hope the idea that X's next landlord will check references is some leverage that working with me is the best interest for both of us

thoughts comments?

Originally posted by @Anthony Angotti :

Hey @Chris Khouri

One strategy is to let them leave and start marketing the property, but let them know that they are responsible for rent until you find a new tenant. Then let them know that they will also pay 33% of the rent for the months that the new tenant took from them as a releasing fee. 

That can be added to the lease as an amendment in PA. Check to make sure you don't violate any of your local laws, but that's a good way to let them out, but still collect what you were due. 

 I wonder how a judge would view taking an additional 33% for the remainder of the lease once the property has been filled.  When this particular situation happened to me, I consulted my attorney.  He specifically told me you cannot charge any amount to the past tenant once you fill the property and I am in PA as well.  I don't think a judge would be too fond of a landlord charging an additional monthly fee for the rent.  A judge may interrupt this fee as doubling dipping (charging the current and past tenant). Maybe a PA attorney could be tagged to clarify if this would be legal.  I think the wording should be a set amount up front (1-2 months) for breaking the lease instead of a percentage of the remaining lease.  Again, I am not attorney but I would be interested if an experience investor or attorney in PA could chime in.  

@Christian Bors

A company actually did this to me while I was renting and it help up in court. They called it a commission on finding a new tenant to take the rest of the lease for me. They told me that I had to pay it and I challenged it. It was a one time fee that they charged for finding a new tenant so it may have been in the way that they charged it. 

If you have heard differently then I think it would be good to have an attorney chime in. 

I didn't pay an attorney to defend myself though so maybe there was something they did to get a one over on me. They added it as an amendment on my lease with my signature though. It was the only way they would let me out of it. 

update:

After giving X two options; one being a "buyout fee" of 2 months rent or finding another suitable tenant I heard nothing back, that was on Friday. I called X today and asked what they planned on doing, the response was "i'm going to stay for the remainder of the lease."

All of sudden X's company moving somewhere else wasn't a factor anymore.......

Anyway, thank you to everyone who gave me great insight on how to deal with this situation and how to mitigate in the future.

Create Lasting Wealth Through Real Estate

Join the millions of people achieving financial freedom through the power of real estate investing

Start here