Tenant just said he may need to break lease

16 Replies

I’ve heard quite a few people state long term leases are worthless, as tenants will move out when they want. Well, my tenant may be getting a better job offer in another state, and he has 7 months to go on lease. However, I am not panicking. Why? Because he has a lease. No, I won’t be telling him he can’t move. But, I told him to refer to the 10 page lease. I will hopefully get a new tenant in ASAP if he moves out, but he will be responsible for any vacancy. And in Iowa, possibly in winter, that is a big deal. If I had MTM, and he gave notice in November, I may have no tenant and no rent for a month or two. Now, you may say he might not pay. Then I guess he will have to decide if he’d like to keep his credit score or have a judgment against him.
I agree but if he pays the month and you get a tenant the next month you cant charge him in the state. I feel like the state of Iowa is tenant friendly state and you better be really promoting that vacancy.... you are 100% right it's hard to rent in Iowa in the winter. We are pushing houses and apartments now knowing we have about 5 weeks

@Tami R.  They are great tenants. I wish they'd stay. But, if a job comes calling, he has to do what is best for his family. And I am the landlord that will absolutely do everything I can to get a new tenant, at the same terms that the current tenant has. I believe it won't be very hard, but it could take a couple weeks. He hasn't given notice yet, but I will work with the current tenant and do the best I can. And my extra work won't "pay off", it'll just be to get the same terms I already have. Just part of being a landlord. And, as we all should know, it's also why we set aside some rent for vacancy and capex, etc. You never know when the tenant will stop paying, or when something will break. 

@Anthony Wick haters gonna hate.

I use a one-year lease with termination fees. I just had a tenant break their lease with seven months remaining. They gave 30 days notice (actually 37), they agree to let me market the home during their final 30 days tenancy, they paid a termination fee equal to two months rent, and they remain responsible for rent and utilities until their termination date.

If they leave and it still takes 60 days to find a new tenant, I've lost almost nothing.

If they leave and I place a tenant right away, I made an extra two months of rent.

I actually make more money on the vast majority of early terminations. You can't do that with a month-to-month lease.

@Nathan G.  If I'm being honest, I have not looked into the legalities of charging an early termination fee in Iowa. If it's permissible, it's a fantastic idea. Obviously, it's too late for this circumstance, but I'm always looking for ways to improve my lease and business. Thanks!

And, I do understand those that love MTM do so because it is easier to get rid of lousy tenants. But a 1 year lease is common in my area, and hopefully the screening process is what gets you "mostly" very good tenants. 

@Anthony Wick I manage 300 rentals. I rarely have to get rid of a tenant and it's not worth switching all of them over to M2M just for the rare bad apple. Everyone's free to run their business the way they want but if you are screening tenants properly and have procedures in place to deal with problems, I see no justifiable need for M2M and one-year leases provide more stability and income.

@Anthony Wick Wow, good to know, we can actually have a lease termination fee? I need to check Oregon to see if that's legal. I love the idea! I have dealt with tenants that bail early, so I try to get them to show the unit for me when I have a qualified tenant. Most of the times this works out for me.

I can't seem to find any Landlord/Tenant Law that prohibits charging an early termination fee. But I also can't find any examples of that being legal in Iowa either. Mostly just Iowa law stating landlord must attempt to mitigate their losses by re-renting unit as soon as possible. I shall continue to search. If anybody in Iowa knows of the legality or not, I hope to find out. It's a question I'll be asking at the local REIA meeting this evening.

@Gary White  No clear answers as of yet. It's not in my current lease, but I will have several units open over the next month, so it's still an addition to my lease that I might want to add. I need to know if anybody in Des Moines, Iowa or Ankeny, Iowa is adding language to their lease about early termination fees. I like the idea. For now, I am attempting to replace my tenant as quickly as possible, as per Iowa law. 

Originally posted by @Todd Powell :

@Anthony Wick Wow, good to know, we can actually have a lease termination fee? I need to check Oregon to see if that's legal. I love the idea! I have dealt with tenants that bail early, so I try to get them to show the unit for me when I have a qualified tenant. Most of the times this works out for me.

 In oregon there are very specific laws regarding this. Suggest you go to a landlord bootcamp the local landlord groups put on (i learned so much , very much worth the $100 ) and read this. https://www.osbar.org/public/legalinfo/tenant.html  

Also fwiw I have been called several times by, I assume, HUD or folks fishing for landlords to file complaints against , so highly suggest becoming very familiar with tenant/land laws

@Anthony Wick if your law doesn't specifically prohibit early termination fees then you should be fine. If you read what Mary shared, even the liberal state of Oregon allows it, though they do place a limit.

The early termination fee should never be problematic if you present it correctly. I give my tenant two options:

1. Remain responsible for the terms of the agreement until a new tenant takes over; or

2. Pay an early termination fee with 30 days notice.

If they voluntarily choose option #2 then there's no risk of them complaining to anyone, particularly the legal system.

@Anthony Wick - we have early termination penalties in our lease. They've been through the money judgement process and held up, here in Iowa. Obviously, the fees HAVE to be responsible and written in the lease. Our lease also has an initial for the tenants in this section, to call MORE attention to it.

@Anthony Wick   A lease cancellation is allowable in Iowa so long as it's mutually agreed upon by landlord and tenant. I've seen where landlords will have a lease cancellation clause written into their lease. Personally, I would not write a standard lease cancellation policy into my lease. Rather, I have a lease cancellation clause that directs a tenant to request a lease cancellation quote from the Landlord. At that point I can evaluate market conditions, time of year, situation at hand, etc and provide a reasoned lease cancellation quote for the tenant to consider. They don't have to agree and I don't have to grant a cancellation at all if I don't want. Once terms are agreed to (move out date, buyout fee, how the deposit will be handled, etc.), we will sign a simple lease cancellation agreement, coordinate the payment and move out and we're both moving forward, tenant being released from the lease and landlord looking for the next tenant. Any fee up to the remaining rent obligation is permissible.

I just executed a lease cancellation for a 1 bedroom. The tenants will pay 3 months rent and plan to move out in 45 days. That gives me 4.5 months to try and find a renter.

Hope this helps!

@Kyle Thomas   Do you put the lease cancellation quote option into the original lease, or bring it up to tenants if they request to break their lease?