Tenants and Breach of Contract

Larry Williams · 2016-11-18T10:51:23-08:00

Greetings All.I have a townhome rental in Lewisville, TX, with the following situation:-Tenants (husband and wife) signed the Texas Association of Realtors Lease Contract.-Two year lease commencing on March 15, 2016.-They paid a deposit of one month's rent.-They have been good tenants, and have paid rent every month on time.-The husband called two weeks ago to tell me that his wife has serious health issues with her back and cannot climb the stairs (has had three surgeries with the last being a fusion). All bedrooms are upstairs. He wanted to know what their options were to terminate the contract early so that they could move into a single story rental. She has been unable to work since July, 2016.-I responded two days later via email that we would allow them to terminate if they forfeited the deposit, and paid two months rent. -I received a letter from them two days ago that they are terminating the contract December 14 and will be vacating the property, not agreeing to the legal termination option, and demanding their deposit back. They are current on their rent. It's a breach of contract since they didn't agree to our terms and sign an amendment.-I'm not using a property management service.What are the best practices for this type of situation? What's the best way to deal with this? Thank you all for your feedback.Larry

Michael Seeker

Investor · Louisville, KY · Member since 2011 · 1k+ posts · 1k+ votes

9y

@Larry Williams, are there any terms outlined in the lease for early termination?

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Tyler Ansell

Investor · Tampa, FL · Member since 2015 · 293 posts · 175 votes

9y

Seems that they were trying to give you 30 days notice but depending on exact dates it's a little short. What does the lease say? In some cases there is a 30 or 60 day out.

If nothing in the lease says how they can get out early ie sublease/release/buy out/termination. Then it's up to you, not them. You offered them a buy out which is totally normal. A place I personally rented and needed out early required 60 day notice and 2 months, plus I had to pay the rent for the 60 days of "notice time".

I would call your attorney and get a response letter put together asap. Need to let them know that you are not accepting their notice as is, and that you will hold them to the obligations of the remainder of the lease unless they follow your set buy out steps.

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Account Closed

Investor · Santa Rosa Beach, FL · Member since 2016 · 232 posts · 153 votes

9y

Hi @Larry Williams

They are bound to the lease agreement until another agreement is reached. Your first step is to start marketing the home immediately with a Dec 15 start date. Finding a replacement tenant cures all.

I would give them a call (w/follow up email) and politely explain that the terms of their letter just aren't realistic. Though you are empathetic to their situation, it is important to reach an agreement that works for BOTH parties. Reiterate that they are responsible for the terms of the lease until the home is re-leased. If they would like to receive their deposit back, in full, they need to cooperate with you to show the property, get it leased and ensure the home is left in "renter ready condition."

If the home is not re-leased prior to their move-out date, the deposit will be applied to the unpaid rent balance. You'll want to check TX law, but in AZ you can't do an eviction if the tenant has already moved out. You have to file small claims to collect lost rent.

Texas law doesn't allow you to collect damages beyond lost rent. You have an obligation to "make every effort to lease the property," so charging a 2-month cancellation fee may not be kosher. If the home isn't vacant for 3 months (1-month sec dep and 2-month penalty) you'll need to refund the balance.

If you have any other questions, don't hesitate to reach out.

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Greg H.Pro Member

Moderator

Broker/Flipper · Austin, TX · Member since 2013 · 4k+ posts · 4k+ votes

9y

@Larry Williams

A few things in play here. Just because they are giving you 30 days notice does not release them from liability under a TAR lease

What penalty is listed under Para 28 B 4 for you having to secure a replacement tenant ? @Account Closed In Texas, you can charge under the terms of the lease to secure a replacement tenant(I charge 100% of one months rent)

You can change the tenant for:

Any lost rent

Replacement tenant fee if applicable

Any damages, make ready etc

You can deduct from their deposit and send them a bill for the difference. You are required to send this with 30 days of move out or receiving a forwarding address whichever is later

Now, the reality is you have very little chance of collecting in Texas. You can take them to Small Claims court but they more than likely have a lot of medical bills and other debt already and are basically noncollectable.

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Larry Williams

OP

Realtor · Flower Mound, TX · Member since 2015 · 8 posts · 3 votes

9y

Many thanks to everybody who has posted a response. Your insight is much appreciated.

TAR Paragraph 28B(4)(b) reads that the tenant will be pay for 100% of one month's rent if the Landlord finds the replacement (the situation in this case). And, it's based on 28B(4) stating that this penalty is in play IF the Landlord agrees (no written agreement in this case). However, I agree that legal pursuit will likely be futile in this case.

I'm correct, right, that the tenants are legally bound to the full 2 year TAR lease and all unpaid rents? Paragraph 28 reads: "Tenant is not entitled to early termination due to voluntary or involuntary job or school transfer, changes in marital status, loss of employment, loss of co-tenants, changes in health, purchase of property, or death." Just a verification question to be more knowledgeable. I very likely will not pursue legal remedy.

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Kyle Hipp

Investor · Appleton, WI · Member since 2012 · 1k+ posts · 464 votes

9y

You as the landlord are just as bound to the lease as the tenant is. If a tenant gives notice that they will be moving out early then you are obligated to recent the property. You have a fee in place in the lease of 1 months rent and should have explained this as an option. If you want to offer an early termination agreement where they are not liable for ongoing expenses then that 2 months worth of rent can be made as an option above and beyond.

I suggest a reset with you tenants in order to clearly explain the options at hand. Right now you guys both seem to be huffing and puffing and no one's interests will be met. Biggest thing is to be able to get in and get the place rerented

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Joseph B. Davisson

Dallas, TX · Member since 2015 · 58 posts · 55 votes

9y

Your initial offer (deposit + 2 months rent) sounds perfectly reasonable. The tenant merely giving notice probably does not end their obligation under the lease but practically speaking this comes down to economics.

1. How long will it take you to lease to a new tenant?

2. How much will it cost to make ready and lease?

3. How much are your actual damages? (in excess of the deposit)

3. How much will it cost you to pursue these tenants for damages? (legal fees and your time)

These tenants are betting that you will quickly find a replacement tenant and the cost to lease will be less than the 2 months rent you offered to let them pay as a penalty taking into consideration the cost to collect from them even if the cost to lease exceeds the 2 months rent amount. They are probably right. Get started locating a new tenant right away.

1 Reply

Larry Williams

OP

Realtor · Flower Mound, TX · Member since 2015 · 8 posts · 3 votes

9y

Joseph. Thank you for the response and recommendation. Your summary basically highlights the consensus of all of the responses. I'll begin looking for a new tenant!

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Tenants and Breach of Contract - Early Termination

Tenants and Breach of Contract - Early Termination

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