Early Lease Termination

7 Replies

Tenant bought a house and terminated his 9 month rental lease 4 months early.  There is no early termination clause in the lease, the tenant is on the hook for the entire lease, but I am fine with an early termination fee of  2 month rent penalty. The questions are 1) Can I charge 2 months rent penalty for early termination? 2)  What form do I use to inform the tenant that I am charging 2 months rent as early termination fee? 3) How much time do I have to inform tenant? 4) Since he paid first, last and security, I intended to use "Notice of Intent to Impose Claim on Security Deposit" for the entire 2 months rent, but wondered whether or not the last months rent can be considered a security deposit and treated the same as a security deposit, or must it be treated differently? I thought that since it is a last months rent deposit, I could use it to pay the April rent, and only write the "Notice of Intent to Impose Claim on Security Deposit" for withholding the security deposit. I'm just not sure what is the right way to do this. Maybe both ways are acceptable, but I want to make sure I do it correctly and legally. Thank you

Background: There was some discussion about the possibility that they might buy a house, and they asked what would be the penalty, to which I responded that I didn't know, but we also discussed that the usual and customary seems to be 2 months rent penalty, and they concurred that was the typical solution, so we left that conversation unsettled but in agreement that 2 months rent penalty would seem to be fair. The signed lease was issued after this discussion and contains no early termination clause, and tenant signed lease without any such clause. The lease also contains a 60 days notice clause if tenant is ending the lease, but tenant provided less than 60 days notice, they provided 27 days notice to be exact. Otherwise, tenant was a good tenant, we had no problems during their entire stay. Note: Tenant owes a little more than the 2 months rent penalty which I have in deposits, due to a utility bill and a mandatory cleaning fee, so tenant will actually owe a little more than what I have in deposits, less than $200 more, so I will have to request payment from them for the additional amount due.  

How do I do this correctly? Thank you

First of all, if your primary concern is doing this correctly and legally, then you should contact an attorney for advice.

I don’t know about Florida, but in Texas a landlord has a duty to minimize the costs to the tenant in a situation like this. If I were faced with this situation, I would list the property for rent and the tenant who violated their lease and moved out would only owe rent until the date a new tenant moved in.

Hi Jon, 

I'm a Leasing Coordinator at a property management firm here in NYC.  Since we are in two different states, I'd imagine the laws are different but I can tell you how I've handled this situation in the past.  When I receive written notification by a tenant requesting to terminate their lease early, I explain they have 3 options.  They can either 1) sublet 2) assign the lease or 3) pay a 3 months rent lease termination fee. The first two options are written within the rent stabilized lease and DHCR rider.  The third one isn't and when tenants point this out, I simply explain to them that they're responsible for the full lease term and as a courtesy, ownership will release them from the lease without penalty if they pay the fee.  For tenants who have more than 3-4 months left in their lease, this can be effective.  For those with less, you may want to consider a 1 or 2 month penalty fee and have them agree to surrender their security deposit. 

When they agree to the terms, I prepare a surrender agreement which states the date of lease termination and the lease termination fee.  The funds must be submitted in the form of a cashier's check with the signed surrender agreement. 

In the future, I'd suggest including an early termination rider at the onset.  If you know they may need to break the lease around the 9th month of the lease, you can structure the agreement to read there will be a two month's lease termination fee if they terminate the lease between the 1st or 8th month of the lease and there will be no penalty if they need to terminate the lease between the 9th and 12th month.  Also make it a requirement that they will need to provide 60 days written notice so you have ample time to show the space and find a new tenant. 

I hope this information is helpful!

@David Hines Thank you. That’s an interesting law in Texas. To my knowledge no similar law exists in Florida. The customary early termination penalty here is 2 months rent; in fact a family member in FL just paid a 2 mo early termination fee when they relocated, even though the apartment was in a very desirable area and was probably re-leased immediately at a higher rent. Maybe Florida is weird. This is the first early termination I’ve had so I’ll have to double check everything.

Originally posted by @Jon S. :

David Hines Thank you. That’s an interesting law in Texas. To my knowledge no similar law exists in Florida. The customary early termination penalty here is 2 months rent; in fact a family member in FL just paid a 2 mo early termination fee when they relocated, even though the apartment was in a very desirable area and was probably re-leased immediately at a higher rent. Maybe Florida is weird. This is the first early termination I’ve had so I’ll have to double check everything.

 You have a Florida duty to mitigate damages. I'm licensed in FL if you'd like to discuss. 

If the money was paid as the last months rent, HOPEFULLY you have it segregated. At this point, it is NOT your money. If you lease the premises during the time the last months rent was paid, I suspect it must be returned. Furthermore, unless the tenants AGREE and sign, you cannot charge an early termination fee. Are you in compliance with Chapter 83? 

Originally posted by @Ronald Rohde :
Originally posted by @Jon S.:

David Hines Thank you. That’s an interesting law in Texas. To my knowledge no similar law exists in Florida. The customary early termination penalty here is 2 months rent; in fact a family member in FL just paid a 2 mo early termination fee when they relocated, even though the apartment was in a very desirable area and was probably re-leased immediately at a higher rent. Maybe Florida is weird. This is the first early termination I’ve had so I’ll have to double check everything.

 You have a Florida duty to mitigate damages. I'm licensed in FL if you'd like to discuss. 

 Statute please in FL?

First and foremost, you need to change your lease so this is addressed in writing before the tenant attempts to terminate. It's too late for that now but it seems the tenant accepts the 2-month penalty so just roll with it.

I would make the tenant pay the two-month penalty and call it a "termination fee" so it's clearly not identified as rent or a deposit. Do not use the last month's rent or the security deposit to pay for this. Make the tenant pay it now. Once they are out, you can refund their last month's rent without issue. The security deposit is addressed the same way you would any other move-out.

You do have a responsibility to mitigate tenant losses by making a good faith effort to find a new tenant. However, that requirement goes out the window because you are officially releasing the tenant from their lease once they pay the termination fee. If the tenant refused to pay the termination fee, you could hold them accountable for the full term of the lease except that you have to make a good faith effort to find a replacement tenant. Once the replacement is found, the previous tenant has to be released.

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