Early lease termination

17 Replies

Hi All,

I have a tenant that just moved in, March 1st.  We signed a 2-year agreement, early buy out clause of 30 days notice, 1 months rent.

He is giving me a hell of a hard time now, he is breaking the lease for a better opportunity.  I told him our signed agreement states the early termination fee is 1 months rent, he wants to give me half and hasn't paid anything this month, his last month with me. 

Should I bite the bullet and accept the half months rent or take him to small claims court for the full amount? 

I have another tenant already lined up, a signed lease and new deposit but I feel fully entitled to the termination fee, it was spelled out in the lease agreement.  

Personally, I'd take him to small claims. But that's just me. I'm all about principle and doing what I feel is right and it seems you're the same way as well. Some people would tell us, "It's going to be a waste of time" or "You're going to put all that effort in over a few hundred dollars?" but personally I like to hold people accountable as if I didn't it would bug me. 

It's kind of like the landlords who do cash for keys - I wouldn't - mainly because if someone isn't paying me rent I want to put that on their record so other landlords who do a credit check don't go through the same nonsense with that deadbeat tenant. 

I'm glad you've got somebody else lined up; cash flow is essential! 

Thank you @Karl B. accepting the half months would be a complete favor to him and honestly, I painted the place for him (a color he picked), let him move in a day early, and reduced the rent for him.  I've gone above and beyond for him, which I feel is why he's trying to take advantage now.  I'm going to hold my ground and take this all the way.  I'm just concerned I may not get the full amount, is it a gamble 50/50 that I will get my money or am I guaranteed to win?  I have a great lease, did a background check, and have a ton of txt from him, a series of state he agreed to the lease, but now he's changing his mind. 

My pleasure. Personally, I'd wait until he moved out so he doesn't cause any unit damage out of malice. Once he's out, have the locks rekeyed for the new tenant. If the old tenant tries to give you half the money, tell him no - all or court. 

If you've got it all outlined in the lease it would likely be a solid win. What would his defense be? I'm assuming he didn't have any issues with the place - the only way I could see him winning is if there was a health issue that wasn't addressed (broken water heater, bug infestation, etc.). 

He was contacted a week after moving in, for affordable housing at a luxury building (BMR, below market rate apartment), he was on the list for 2 years.  @Karl B.

I would tell him you are taking him to court to collect the money owed if he does not pay the full amount owed.  I would walk away at that point a see what he does. Conversation would only serve to undermined my position. 

Wait and see what he does.

Not sure I understand what he owes. If he has not paid April rent I would guess he owes that and the one month penalty. Tell him if he doesn't pay up he will also have a eviction on his record.

Did you collect a deposit and LMR before he moved in.

@Thomas S. I collected one month's deposit, and 1st month's rent, last month when he moved in.  He owes me for this month's rent, pro-rated which is $1020.00.  So far I've collected $2550 from him, which he argues is more than fair for such a short amount of time.  He is moving out this month so I can't evict him.  

If you collected 1st month and he does not pay for April you should be starting the eviction process to collect April rent regardless of when he moves out. It is not legal to use a deposit for rent therefor you have grounds to collect rent owed with the eviction. Give him formal notice to pay rent and proceed. Assuming you win you can then convert that to a small claims court ruling depending on how your eviction/small claims court operates.    At the same time you can get the court to rule that the deposit can be used as the penalty for breaking his lease.

Start the eviction process and see what he does. That will likely be your best win/win approach.

It sure looks like you have the law on your side.  So, it seems that you would win in court.  

Just ask yourself if your concerns and a court case will cause you a lot of stress and headache.  If so, is it worth it to fight the tenant, or just move on?  You already another tenant lined up, you said.

Only you can answer that for yourself.   (And maybe reconsider your criteria for choosing tenants.)  

Please let us know how this turns out.

"court case will cause your tenant a lot of stress and headache"

The question you ask yourself is whether going to court will cause undue stress and headaches for the tenant. If they value their credit and have a job then they would be motivated to pay what they owe to avoid court, damaged credit, embarrassment etc..

For a landlord it should only be a business decision, does a tennat owe money, if yes then th eonly question should be what is my course of action necessary to improve my odds of collecting.

@Thomas S. I'm going to try to get the half month's rent from him like he wants to pay, so at least I have that and try to diffuse the situation.  I'll take him to small claims court after. 

If I contact my attorney, they will charge me.  If he pays me, I only need to collect another $500.00.  

Have you thought about contacting the leasing department of the BMR building your tenant is moving to? Or at least pointing out to your tenant how the filing of a small claims lawsuit against him for nonpayment of rent might affect his eligibility for that Below Market Rent apartment?

In some jurisdictions, if you accept partial payment, especially in light of him moving out, it could put the squash on evicting. Even if you don't actually want to go to court, if you live in one of those jurisdictions, threatening to sue will have no effect if he knows the game and has already paid you partial.  Just recommending you check before accepting payment.

Another strategy (though admittedly this works better when the tenant is on the hook for the whole lease rather than just a 1-month fee), is to tell you'll forgive the remainder of the lease and report the forgiveness to the IRS as income- which could make him ineligible for benefits (such as a Below Market Rent apartment).

The best part is you have a tenant lined up.  Even if he stays, with what you said about the extras you did for him, sounds like you are WAY better off having someone else rather than someone so demanding for the next 2 years

@Jean Haisch The funniest part is, he was accepted to the affordable housing program that MY company manages!  I'm a full time property manager.  I contacted the manager of the building he is going to, he has already been accepted and screened, it won't affect him unfortunately.  They don't screen after the 1st year so it won't affect him in the short term but definitely in the long run if I pursed. 

Originally posted by @JJ Conway :

In some jurisdictions, if you accept partial payment, especially in light of him moving out, it could put the squash on evicting. Even if you don't actually want to go to court, if you live in one of those jurisdictions, threatening to sue will have no effect if he knows the game and has already paid you partial.  Just recommending you check before accepting payment.

Another strategy (though admittedly this works better when the tenant is on the hook for the whole lease rather than just a 1-month fee), is to tell you'll forgive the remainder of the lease and report the forgiveness to the IRS as income- which could make him ineligible for benefits (such as a Below Market Rent apartment).

The best part is you have a tenant lined up.  Even if he stays, with what you said about the extras you did for him, sounds like you are WAY better off having someone else rather than someone so demanding for the next 2 years

Originally posted by @JJ Conway :

In some jurisdictions, if you accept partial payment, especially in light of him moving out, it could put the squash on evicting. Even if you don't actually want to go to court, if you live in one of those jurisdictions, threatening to sue will have no effect if he knows the game and has already paid you partial.  Just recommending you check before accepting payment.

Another strategy (though admittedly this works better when the tenant is on the hook for the whole lease rather than just a 1-month fee), is to tell you'll forgive the remainder of the lease and report the forgiveness to the IRS as income- which could make him ineligible for benefits (such as a Below Market Rent apartment).

The best part is you have a tenant lined up.  Even if he stays, with what you said about the extras you did for him, sounds like you are WAY better off having someone else rather than someone so demanding for the next 2 years

 Good point.  I contacted my attorney today before making any moves, I've stop communicating with the tenant until I make a decision on what to do.  Honestly I could probably write the $500.00 off as a loss on my taxes, and I know the attorney will charge a fee, so I'm thinking my best bet is to just accept his offer of $500.  Stay tuned.  I will updated everyone with my decision.   

@Thomas S. Spoke to my attorney today.  I can't start the NTV process because the tenant has agreed to move out and the NTV process is only for an eviction.  He stated just collect the keys from the resident when he moves out and accept nothing less then what is owed.  They will advise once keys are collected how to proceed about collecting any money owed.  

I issued the tenant an official notice today stating that rent is due, his early termination fee is due, and per our lease I do not give consent to apply his security deposit to his early termination fee. 

@Thomas S. @James Barnhart @Karl B. My tenant knows I have him on the hook for the full amount of the termination fee, he admitted to it today and my attorney confirmed it.  I'm going to take only $600.00 from him vs the $1020.00.  He works multiple jobs; Uber, Home Depot, etc. and just got accepted into affordable housing.  I have the place rented with no vacancy loss, a larger security deposit from the new tenant, and $125 more a month in rent with the new lease. 

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