Breaking lease and subletting

General Landlording & Rental Properties
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Breaking lease and subletting

Christopher Lombardi
Developer · Point Pleasant Beach, NJ · Member since 2015 · 303 posts · 216 votes
What would you do in this situation? I have a tenant who quietly moved out and moved across country and got a bad credit tenant to sublet in direct violation of his lease agreement. Now I have a guy living in the house for 7 months who I never would have allowed move in, but is current on rent, and a former tenant who pretended to be living there the entire time now demanding his security back. Here is what I think my options are: 1) invoke the hold over tenant clause and try to charge the original tenant double rent because he is technically holding over since his guests are still occupying the home. 2) keep the security for breach of agreement and continuing allowing the other guy to rent as long as he is on time with payments 3) evict the other guy now, who doesn't even have a lease with me, keep the old security deposit, and get a new tenant. Anything I'm missing? What would you do ?
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Travis Lloyd
Real Estate Broker · Fairfield, CT · Member since 2015 · 312 posts · 231 votes
9y

Sounds like you have two different issues: You have a tenant asking for his security deposit back, and you have someone living in your apartment who shouldn't be there.

The current resident first: Does this sub-letter have any intentions of leaving at the end of the lease? It sounds like you want them out - do they seem amenable to departing? A lot of sub-lets understand they're only short-term. Obviously if they are not going to go quietly, you have a much deeper issue. Just wondering if you have spoken with them to determine where they are at? And if they seem to be resistant to leaving - try offering some $ incentive to leave (and sign a release of course).

As for the security deposit - personally, I would not try to keep it due to the sub-letting. There is an old saying - being right is cheap, proving you're can get very expensive. And a tenant crying "the landlord stole my security deposit" goes way too easily. Turn it around - hoping the current occupant does leave (one way or another), can you identify (and document) sufficient damages/problems with the unit to justify keeping the security deposit?

Personally I would try to get the current occupant out, without taking them to court. Then try to identify sufficient problems to retain as much of the security deposit as possible.

There is an alternative - IF the current tenant could prove consistent rent payments, regardless of their credit, I might actually try to get them sign a new lease - at a slightly increased rent, PLUS a security deposit. IF they could come up with the security, and the increased rent - I might just keep them.

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  • John D.
    Rental Property Investor · Allentown, PA · Member since 2016 · 279 posts · 105 votes
    9y

    Hmmm.   

    I would go with #2 for the breach of agreement.  Keep the security.  

    The other guy has paid 7 months in a row and since you havent said otherwise, I assume the bad credit tenant hasn't been a problem.  If thats the case, if I was local, I would probably just have a conversation with him and get him to sign a new lease.  My thoughts are that even if he has bad credit, he has a good track record with you.

    I'm interested in following this thread and reading the rest of the opinions.

    Good luck to you.

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  • Lelith Walker
    Investor · New York City, NY · Member since 2013 · 263 posts · 141 votes
    9y

    I would contact my lawyer/discount legal service immediately.  I would not give the tenant his security deposit.  I was in a similar situation.  the tenant did tell me that she was moving and subletting to someone else eventhough my lease said no sublet.  she was an ok tenant so I contacted my lawyer he said no. that letting a tenant with less money and less credit than the previous or what you would normally select is considered income discrimination in my state.  if anything happened I could go to jail.  I told her no that I am sticking to the lease.

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  • Travis Lloyd
    Real Estate Broker · Fairfield, CT · Member since 2015 · 312 posts · 231 votes
    9y

    Sounds like you have two different issues: You have a tenant asking for his security deposit back, and you have someone living in your apartment who shouldn't be there.

    The current resident first: Does this sub-letter have any intentions of leaving at the end of the lease? It sounds like you want them out - do they seem amenable to departing? A lot of sub-lets understand they're only short-term. Obviously if they are not going to go quietly, you have a much deeper issue. Just wondering if you have spoken with them to determine where they are at? And if they seem to be resistant to leaving - try offering some $ incentive to leave (and sign a release of course).

    As for the security deposit - personally, I would not try to keep it due to the sub-letting. There is an old saying - being right is cheap, proving you're can get very expensive. And a tenant crying "the landlord stole my security deposit" goes way too easily. Turn it around - hoping the current occupant does leave (one way or another), can you identify (and document) sufficient damages/problems with the unit to justify keeping the security deposit?

    Personally I would try to get the current occupant out, without taking them to court. Then try to identify sufficient problems to retain as much of the security deposit as possible.

    There is an alternative - IF the current tenant could prove consistent rent payments, regardless of their credit, I might actually try to get them sign a new lease - at a slightly increased rent, PLUS a security deposit. IF they could come up with the security, and the increased rent - I might just keep them.

    2Reply
  • Mindy JensenPro Member
    BiggerPockets Money Podcast Host · Longmont, CO · Member since 2014 · 7k+ posts · 10k+ votes
    9y

    @Christopher Lombardi , how I see this situation is:

    Tenant A signed a lease with you and gave a deposit. 

    Tenant B took over that lease, and did not give you a deposit. Therefore, Tenant A's deposit covers the property until the lease ends. Tenant A should have asked Tenant B for a deposit, and did not. 

    However, I live in a Landlord-Friendly state, and NJ is not so much. Check with your state laws regarding security deposit or with an attorney familiar with your state.

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  • JD MartinBusiness Member
    Moderator
    Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes
    9y

    ^ What @Mindy Jensen said. I would follow what was left of the original lease and conclude it. If you are at the end of the lease, end it and follow your own protocol for getting a new tenant, whether it includes current guy or not. If you have no damages at the end of the current lease, you return the deposit. If you have damages, you retain the deposit. Your contract was with guy #1, so if guy #2 did damages that's too bad for guy #1. If there are damages beyond the deposit, you sue guy #1 for those damages. 

    If you are not at the end of the lease, then follow your protocol for breach of agreement. If NJ allows you to keep deposits for breach of agreement, then you do that, but pretty much most states - even landlord friendly states - hold that the deposit is for covering actual damages, not hurt feelings or inopportune residents. If you don't have any damages, you generally don't have any legal claim to the deposit. 

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