Real Consequences of breaking lease?

Question

Hi all,

I'll be closing my first rental soon and wanted some clarification. If a tenant moves out, with or without notification, prior to their lease being over what consequences do they really face?

What can I do to recoup losses?

Is it legal to withhold the security deposit even if there's no "damage" to repair with it?

Do people tend to file a small claims against them for the balance that would have been due through the end of their lease?

What other remedies or options would I as a new landlord have?

I hope I won't have to deal with this, but things happen and I'd like to be prepared just in case. If it matters the property is in the St. Louis MO, in the city.

Thanks

Cheers!

Russ M. · Answer

Our leases specifically spell out a charge for early termination or breach of contract.  We keep it separate from security deposit so the security deposit can be used in the event of damages.  We even had one where the tenant moved due to a new job, and his new employer paid the early termination fee as part of the relocation package.

It may not work for all, but it was approved by our lawyer and it has worked well for us so far.

Joseph Mcvey · Answer

@Donald Shaver I recommend reading up on Missouri Landlord Tenant Law here:

https://www.google.com/search?q=missouri+landlord+...

but in case you don't have time it states:

"The landlord may keep all or part of a deposit to pay for actual damages (not for normal wear and tear), unpaid rent, or lost rent due to the tenant moving out without adequate notice."

So if you suffer losses due to inadequate notice and are unable to rent in a timely manner you can keep the deposit, but if you are able to get it rented before any loss is incurred technically you should return the deposit. Whether you do or not is another story.

Chances are you wouldn't file small claims and even if you did and were victorious the chances of getting anything is slim.(depending on the tenant)

Donald S. · Answer

@Matthew Olszak while I thank you for the information I would say you have a pretty dim view on who/why people rent. I rented for 3 years because of work, and I know plenty of people who rent for tons of reasons other than they are poor at managing finances. My parents have rented the last 6 years because it's easier to rent their house than worry about property taxes, repairs, etc that would come with owning the house. They used to own and lost it to the recession, but don't plan on moving into a new one ever probably. But thank you for the tips on small claims. I'll look into local laws on keeping deposits.

Any local STL people know our specific laws?

Matthew Olszak · Answer

What you can do with the deposit and how you need to do it will depend on your state and local laws. In general, many tenants are renting because their credit is garbage and they manage their finances worse than [insert president from the other party you don't vote for] manages the white house. Unless you have a class A property and a tenant with great credit or who you know is looking to buy a house soon, you have no real recourse. You do have artificial recourse that hurts them but doesn't help the,, you can get a judgement, but I'd suggest doing so on your own (its easy in small claims court) and not paying an attorney, because collecting on that judgement will be a longshot.

Tenants will leave when they leave, they don't care about your contract. Your threats won't matter, the consequences won't matter, their priorities are different than ours (hence the poor financial management) so expect them to worry about keeping to the contract last. You can get a judgement easily and sit on it and hope to collect someday, but don't spend 2k doing so, because you likely won't ever see that money.

Peter MacKercher · Answer

@Donald Shaver Typically if someone breaks a contract, that's considered non-performance on the terms of the contract. Deposits are put down to ensure performance, so, depending on what the language of the lease is, their deposit may be forfeit if they're breaking before the end of term. See if there are specific terms related to early termination that'd add more detail about what happens in that situation.

If someone abandons a property without notice, however, there's not much chance that they expect to recover the deposit. We've seen that happen after a property was sold, and they had no forwarding address, their numbers stopped working, etc. Your recourse in that situation is basically nothing unless you also get screening information from the seller so you have DoB, SSN, driver's license #. That isn't always the easiest information to convince a seller to provide during a sale (they'll say they're concerned about privacy) but without it you're sitting on some added risk.

That said, even with those items there's no guarantee you'll get any collections out of recovery efforts. I've seen collections rarely have any immediate payoff; generally that's a long-term plan and a punitive measure so that those who break contracts don't get off without there being any record or consequence, even if it is just something that follows them on their credit. I consider that a duty as a landlord, as it will be a warning sign for others.

I have recently seen a case where a collection was successful. It was on the tenant's record and they decided to apply for a mortgage to buy a house. The lender required the former tenant to satisfy the debt, and the collection company in place had stayed active on the account and was able to collect the judgment amount. So, results can vary, but you'll need to do everything you can and be persistent to see a benefit.

Scott Hildebrand · Answer

Good plan. This is one of the toughest issues in leases- when someone terminates, what are they liable for? If a clause is in the contract that is essentially liquidated damages, the issue is largely solved before it has to be debated and litigated.

Matthew Olszak · Answer

You're right, my view is specific to my area where you can buy for less than you can rent and you can buy with just $1-2k down as a first time home buyer. There are many other areas of the country much more expensive or where one can rent for less and have the ability to move as they please and have less worries, which is especially important for those in the tech sector who change contracts frequently. Definitely not wanting to open up the rent vs. buy can of worms again though :-).

Back on topic, like I said, if you can handle the minor paperwork, definitely file small claims yourself against any deadbeats. You'll win the judgement and might get some money down the road some day with decent judicial interest rates.

Real Consequences of breaking lease?

Most Popular Reply