Advice for a tenant breaking a two year lease
Rental Property Investor · Indianapolis, IN · Member since 2019 · 30 posts · 27 votes
Advice for a tenant breaking a two year lease
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Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
7yMany tenant will offer to sign a two-year lease just to beat out other applicants, knowing full well they won't stay the full term. I stopped accepting leases beyond one year because I discovered the majority of tenants break them.
There is nothing "unethical" or "mean" about charging a penalty. The tenants willingly entered into a two-year lease and are legally obligated to fulfill it. Letting them out early is your nice but you should be compensated for your loss.
Here's my process:
Tenant requests to break lease early. If they have more than six months remaining on their lease, I tell them they can pay me an early termination fee equal to two months rent, stay responsible for rent and utilities for a full 30 days (whether they occupy or not), and allow me to market the unit and show it to prospective renters. If they have less than six months, they pay a penalty of one month. The fee is due when they give 30 days notice, not when they move out, and it cannot be taken from the deposit.
If they refuse to pay the penalty, I hold them to the original terms of the agreement. Let's say they refuse to pay the penalty and move out June 1st. I start marketing the property as soon as I verify they are out. I do my move-out inspection, clean and repair, and then wait. If I find a tenant in 15 days, I use the deposit to cover the turnover costs and the unpaid rent up until the new tenant takes over. If it takes me three months to find a new tenant, I hold the original tenant responsible for three months of rent.
In my experience, about 80% of my tenants choose to pay the fee because they don't want the risk of additional costs and they want a good Landlord reference.
In my experience, almost 100% of those units are rented quickly and the penalty fee is extra income.
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37 Replies
- Real Estate Agent · Southington, CT · Member since 2008 · 5k+ posts · 3k+ votes7y
@Marshall White Since you don't have an early lease termination fee in their lease I would just tell them the best you are willing to do is have them being responsible for the rent until you find a new tenant.
In my opinion you have 2-3 months of history with the tenants and don't owe them any more of a break than that.
Them being off the hook for the rent for the remainder of the lease term once you fill it should make them very cooperative for showings while they live there and when they vacate the unit should be left in good condition because the sooner it is leased the sooner they have no more obligation to the property.
- Great Falls, MT · Member since 2017 · 97 posts · 172 votes7y
@Nathan G.
This is exactly how I look at it! And in these situations, I ensure that I am adequately compensated for my time, efforts, and stress. I don’t take advantage with insane fees, but I do charge because I don’t work for free.
I don't know of a single jurisdiction that would ever award you the full extent of the lease payments. You are expected to seek a new tenant and not impose stricter qualifications than you did before. It's called "duty to mitigate" (damages). It is highly unlikely to take 20 months to find a new tenant, and even if it did, it's going to be seen as unreasonable to most judges. You would get three months at most, lease or no lease. I have never needed more than two weeks to find a new tenant in our A properties. IF the tenant works with me to allow showings, I can usually release them from their lease with no downtime except a day to clean, which comes out of their deposit because THEY are the reason I need to clean. (I don't charge cleaning between leases that ran their course.) If they WON'T work with me to allow showings (it's in the lease but believe me, showing a property with a tenant not willing to let you in is a huge waste of time for everyone involved), then they have to pay another month's rent to cover the time that they are out until I get a new tenant. In those cases I usually don't charge for cleaning.
- Rental Property Investor · Indianapolis, IN · Member since 2019 · 30 posts · 27 votes7y
@Michael Noto
I agree that they should be cooperative with applicant showings since that will ultimately get them out of their obligations sooner. They have stated they will be as flexible as possible so I foresee a smooth transition.
Thank you!
- Rental Property Investor · Indianapolis, IN · Member since 2019 · 30 posts · 27 votes7y
Originally posted by @John Teachout:
Regarding pets, we used to just not allow pets but based on our experience, almost every house that the owners had no pets somehow winds up with them. So we have an "animal policy". I currently charge a $200 non refundable "fee" and then an additional $20 per month rent per animal. (max 2) We don't allow cats no matter what as I'm allergic to them. The ESA thing is just a scam for most people to get animals into properties that either wouldn't allow them or avoid fees. We of course would allow an ESA but they MUST provide documentation. (which can be had off the internet in just a few minutes, grrrr)
I definitely understand this. Do some of your potential applicants with pets pass up on your rental due to the non-refundable fee and the increase in rent for their pets? I'm just curious because I have not heard of that type of arrangement before. I have seen an increase in rent ($20 - $25 per) for pets or a large non-refundable fee of $200 to $300 but not both at the same time. I'm just curious if you feel this has a substantial effect on your applicant pool or not.
The property we're discussing in this thread has a high rent amount and I actually didn't charge them anything additional for their pets because of this. However, in the future I would like to adjust this.
- Rental Property Investor · Concord, GA · Member since 2015 · 3k+ posts · 3k+ votes7y
Regarding the pet fees and rents, we essentially have that as a "deterrent" hoping this will keep them from bringing in pets. However, most people don't even blink regarding the pet rent. I personally wouldn't pay it but our dogs are not considered our "children" like some people consider their animals. As to whether or not it reduces the rental pool, I'm not sure as I don't collect data. We usually send a tenant profile and that's the last we hear. Not sure why. I'm guessing it's mostly the credit score required as very few have decent credit. Before we added the monthly animal rent, our one time fee was $250. We reduced that to $200 and added the $20 per month per animal. (There's only one "fee" despite how many animals they have) Our SFR properties rent for $800 to $1100 per month.
- Rental Property Investor · Concord, GA · Member since 2015 · 3k+ posts · 3k+ votes7y
@Nancy P. (from a 10 second search of the internet)
In other states, a landlord must make reasonable efforts to re-rent vacant units as a result of renters breaking their lease. In Florida, however, the rental laws do not exact the same requirements from landlords. ... This means the renter will have to fulfill their remaining financial obligations until the lease ends.
Originally posted by @John Teachout:
@Nancy P. (from a 10 second search of the internet)
In other states, a landlord must make reasonable efforts to re-rent vacant units as a result of renters breaking their lease. In Florida, however, the rental laws do not exact the same requirements from landlords. ... This means the renter will have to fulfill their remaining financial obligations until the lease ends.
EXCEPT that the landlord can not "unreasonably refuse" a replacement tenant that the old tenant finds. I asked three landlords that I'm on a group text with (one in Florida) if they have EVER gotten the full financial obligations paid to them from a lease. Only one did once, there was 4 months left, tenant's new employer paid it. (So no legal action, just new employer offer accepted.) One (Colorado) has twice been awarded two months rent and they weren't awarded court costs. Florida woman has five or six times had renter find decent replacement tenant which she could not legally refuse and then still collect on the lease. All agree not worth the effort to pursue, put that energy into re-renting your unit.
- Rental Property Investor · Indianapolis, IN · Member since 2019 · 30 posts · 27 votes7y
Originally posted by @John Teachout:
Regarding the pet fees and rents, we essentially have that as a "deterrent" hoping this will keep them from bringing in pets. However, most people don't even blink regarding the pet rent.
Thank you for sharing this! I've been considering different ways to improve my pet fee policies. I have only charged one tenant (out of two that have pets) a fee of $25 per month but they have two dogs. I didn't charge anything additional for pets on this property because the rent is $2500 (which is on the high end for my city) and I felt it would be exorbitant to ask for an additional fee.
- Investor · Ocala, FL · Member since 2016 · 299 posts · 110 votes7y
I let tenants out of the lease early (charge them rent until a new tenant is found, which usually doesn't take more than a few days in Ocala) because I have found the tenant will trash the place or do damage if they don't have any expectation of getting back all or part of their security deposit. As for pets, if you don't accept pets they tend to just "find" a stray dog or cat and decide to keep it. For me, it's better to get a nonrefundable pet fee.
- Rental Property Investor · Indianapolis, IN · Member since 2019 · 30 posts · 27 votes7y
@Marelyn Valdes
Only a few days to find a new tenant is really great, I'm sure your total turn time is really fast! I would never deny people with pets in my properties but I definitely need to improve my pet policy.
Do you charge any type of termination fee?
- Investor · Ocala, FL · Member since 2016 · 299 posts · 110 votes7y
@Marshall White - no, I don't charge any termination fee, but do charge for days needed for cleaning or if they move out after the rent due date (we aren't required to prorate rent in FL). Most of my tenants get all or part of their deposits back. Florida law does have an early termination addendum you can do at the signing of the rental agreement - http://www.nolo.com/sites/default/files/FL_EarlyTermination_LiquidatedDamagesLeaseAdden.pdf
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