Early Termination of Lease - What does your lease charge?

Question

In general, what is standard operating procedure for terminating a lease early?

I've seen it where 60 days notice is required, tenant pays full amount for the month they terminate in and forfeits their deposit.

HERE's AN EXAMPLE:

Let's say a 12 month lease terminates September 5th 2018.

Tenant offers 60 days notice on April 12th.   Tenant moves out on the 60th day (let's say that's 6.12)

Monthly rent is $1,200.  Deposit was $1,200

What is standard for what they would owe?

William Osborne · Answer

We charge half a month's rent as an early termination fee, but more importantly the tenant is still responsible for the lease and utilities until the new tenant takes over. This works well for us for a couple of reasons: 1.) It eliminates the chance of vacancy as the original tenant pays pro-rated rent up until the new tenant takes over as well as utilities and 2.) It's in the tenant's best interest to be cooperative with showings and to have the apartment/house looking great as they want someone to replace them ASAP. We also have a clause in our early termination agreement that we can charge a little extra for advertising, cleaning, showings, etc...basically anything that required to find a new tenant. We don't often charge anything else as were getting the early termination fee and there is no downtime for the unit. This system has worked well for us.

JD Martin · Answer

The times we have done it we let them walk with 2 months, which usually works out to one more month plus the deposit if there's no damages. That gets them off the hook for utilities and lawn care as well, so they get a clean break and we get a clean break. If someone wants to leave they're going to leave anyway so we try to make it as easy as possible to just start over. We do offer a "ride it" option, where they can just continue to pay rent, utilities & lawn care while we try to get it re-rented, but there's an element of gambling in there that most people don't want to try; if we get it re-rented immediately, they would come out ahead, but if it takes more than a month they come out behind. So the few times we've had people look to break early, they have all taken the early termination option.

Steve S. · Answer

typically, the lease assumes the tenant would pay the full amount remaining.

If one is able to re-lease the home to a new tenenat, does that absolve the old tenant of remaining rent on the lease they broke?

In other words, are we as landlords incentivized to re-rent it asap to get double rent?

Jennifer T. · Answer

I charge a $250 termination fee, which I think is already too low, plus they are responsible for the rent until a new tenant moves in.  Though I limit that last part to no more than two months because I think that's reasonable and, if it were to appear in front of a court, that's probably all they would allow also.

Michael Plante · Answer

I have left it unrented and then sued them for the entire remaining lease amount as well as have tenants Lined up to rent the month after their lease expires

Steve S. · Answer

Thanks.  This is generally what I do as well with a slight twist.

1) security deposit is forfeited

2) they pay rent for the full month in which they move out.  If it happened to be the end of the month, then i have their security deposit to cover any vacancies.  If they move out on the 10th of the month, they've lost the security deposit and have paid for the full month and as soon as i can get someone in there, i either collect double rent or at least am covered for the rest of the month they moved out plus a whole other month.

I don't think i would charge them through the remainder of the lease if they moved out a few months early but may have to evolve my thinking there.  I've not had that happen before.

Peter M. · Answer

I charge $1000 lease cancellation fee and make it clear they are responsible for the lease amount until a new tenant is placed. I break their lease down per diem and give them credit to the day they sign the termination form. They must move out and turn in the keys before that begins. So if the rent is $1000 and they tell me today they want to move out they first must pay me the $1000. (I have already collected June rent). I give them the form and ask them when they will be moved out by. If they stay past the 1st of the next month they would owe that month of rent just like normal but would not pay it so I make sure the termination is before the end of the month.  On that day they return the keys and move out. Every day the unit stays vacant is 33.33 they owe($1000/30 days/month) which would be deducted from the security deposit if it exceeds the current month's rent credit.

I think I will do as @Nathan G. suggests and raise it to 2x monthly rent because if it takes me more than a month to place a tenant I lose money.

Nathan Gesner · Answer

Steve, I only charge for 30 days. If they want to leave June 15th, I just require them to give notice by May 15th.

Steve S. · Answer

Do you charge them a prorated date through the day of the month they leave or the full month?

For example, if they leave on the 10th (breaking the lease early), do you charge 1 month’s rent penalty and 10 days of prorated rent for the last month they are there?

Early Termination of Lease - What does your lease charge?

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