Tenant Wanting To Break Lease Early...

New to Real Estate · Ooltewah, TN · Member since 2017 · 32 posts · 4 votes

Our tenants (who have rented from us for about 1 year and 5 months) are having to terminate the lease early due to job loss. The husband was the primary bread winner and lost his COO job. He says he found a new one near Nashville and will be out of the house at the end of this month. Contract supposed to run until end of Sept. He's willing to try to help find new tenants but we are thinking we may just move back into that house and rent out the one we are in now. That being said...we'd like to ask for 2 months rent and keep the deposit. Is that a douche bag move considering the guy lost his job? Or...how would you typically handle this? Looking for advise from the experienced landlords.

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Bill F.

Investor · Boston, MA · Member since 2015 · 1k+ posts · 3k+ votes

@Robert Smith

Step one: read your state's Landlord laws with regards to what you can and can't do with security deposits. Some states are very strict that they must be used to repair damage above and beyond normal wear and tear. If ends up in court and you violated the law, you will lose, big time.

As for breaking the lease, that's a hard nut to crack. First place to look is what state law says and then what your lease says. On one hand the tenant has a contract to fulfill. On the other, you can't bleed a stone. If he lost his job, money is tight, what are you going to do if he says 'I don't have two months rent?'

Maybe try and strike a non monetary deal. Something like you release him from the lease if he shows the unit and cleans it to a move in move in ready state.

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Karl B.
Rental Property Investor · Erie, PA · Member since 2015 · 1k+ posts · 2k+ votes
6y
I would add something to the lease regarding early lease termination so in the future you have something to point to if someone wants to/'has to' end the lease early.
In my investing markets it's always tougher to find tenants in March so to ask for an extra month of rent to fill the vacancy is 100% fair, IMO (that being the house is undamaged and will be ready to show after a good cleaning).
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Bill F.
Investor · Boston, MA · Member since 2015 · 1k+ posts · 3k+ votes
6y
@Robert Smith

Step one: read your state's Landlord laws with regards to what you can and can't do with security deposits. Some states are very strict that they must be used to repair damage above and beyond normal wear and tear. If ends up in court and you violated the law, you will lose, big time.

As for breaking the lease, that's a hard nut to crack. First place to look is what state law says and then what your lease says. On one hand the tenant has a contract to fulfill. On the other, you can't bleed a stone. If he lost his job, money is tight, what are you going to do if he says 'I don't have two months rent?'

Maybe try and strike a non monetary deal. Something like you release him from the lease if he shows the unit and cleans it to a move in move in ready state.
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Theresa HarrisPro Member
Member since 2019 · 15k+ posts · 11k+ votes
6y
@Robert Smith check the terms of your lease. If it doesn't specify what happens when the tenant breaks the lease and moves out early (I'm sure your next lease will), tell them they are responsible for rent until the home is rented. Then do your best to get it rented ASAP.
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David Clay
Real Estate Investor · Chattahoochee, FL · Member since 2014 · 133 posts · 107 votes
6y
I agree with all of the above regarding follow your lease and add a note about such things in the future. However, o personally would release them with no big issues. I might ask for an extra month or ask to keep security. Get them to sign off on any agreement. It sounds like they were good tenants so o wouldn’t try to over do it.
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Michael Ablan
Real Estate Broker · Watertown, NY · Member since 2016 · 1k+ posts · 1k+ votes
6y
@Robert Smith - I usually let them out of the lease if they're leaving regardless. I do require they pay an early lease termination fee of 2x the rent.
We aren't allowed to use the deposit towards rent, so we refund the deposit on paper and then directly reapply those funds towards 1x of rent. All of this is with consent of the tenant of course
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Anthony Wick
Rental Property Investor · Ankeny, IA · Member since 2017 · 2k+ posts · 3k+ votes
6y
@Robert Smith
You should find out your state laws. Here, we must attempt to mitigate our losses. Merely moving into the vacant unit may mean you cannot charge them anything extra.
1 Reply
John Teachout
Rental Property Investor · Concord, GA · Member since 2015 · 3k+ posts · 3k+ votes
6y
We have a lease breaking fee in our contract but in reality, if they leave the house in good condition and ready to rent condition, I'd probably just let them go and get it refilled. Our lease states one month's rent as a fee. Some states require mitigation of loss and others don't require you to make any effort to re lease the property and you can leave it empty with them being responsible for the remaining period.
In this case of a job loss, if you get all the rent for the time they occupy it, good for you.

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Account Closed
Member since 2019 · 1k+ posts · 1k+ votes
6y
@Robert Smith
6.35 The Tenant covenants and agrees to pay administrative costs of no less than $500 in addition to any security deposit deduction(s) for the request of terminating Lease prior to the agreed upon date.
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Rod HanksBusiness Member
Insurance Agent · Dallas, TX · Member since 2013 · 743 posts · 462 votes
6y
@Robert Smith
He lost his job so if he breaks lease he loses his deposit at minimum and if you decide to go after him in court that’s your call. Personally in situations like this I thank them for letting me know and ask that they leave the place in spotless condition.
Rod Hanks Insurance4.9153 Reviews
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Rajib Garu
Property Manager · Cincinnati, OH · Member since 2017 · 63 posts · 19 votes
6y
We have encountered this situation multiple times , here is what i would do sign a "Early termination/release of Lease Agreement" with security deposit forfeited and 2 months of rent with a payment plan , i would even get it notarized in a local bank or credit union for free.

PS : Always check local state/county laws
0 Reply
Matt M.
Specialist · Easton, PA · Member since 2018 · 1k+ posts · 2k+ votes
6y
@Robert Smith
Keep the security deposit and let the go. Why try and fight them for money when he lost his job.
1 Reply
Rose WhitePro Member
Real Estate Agent · Woodstock, GA · Member since 2019 · 72 posts · 43 votes
6y
@Robert Smith hi Robert, did you have any clause to breaking lease on the contract?
If so, thats what you should follow.
Otherwise, you could speak to a lawyer about keeping the deposit or whatever rent amount you need.
We had our lease to where it was 1 year but if no one says anything, it renews automatically for another year. We found our current house to purchase but it was sooner than the lease term. We paid until verbally agreed date (lease started in june but we purchased our house the following march, and we paid rent until may since we agreed verbally/text). We already had mortgage amount we had to pay that wad higher than rental amount but we still paid. It was the “right thing to do”.
Also to add, whether a person loses their job or not, you have things to collect as a landlord, and they have things to pay as a tenant.
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Blake Garcia
Rental Property Investor · Big Sandy, TN · Member since 2013 · 147 posts · 91 votes
6y
@Robert Smith
If theyre out and its in good shape get a new qualified tenant and consider if the rent can be increased.
Realize that at least they gave the warning and saved you months of expecting rent that wasnt coming.
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Michael King
Rental Property Investor · Navarre, FL · Member since 2019 · 913 posts · 640 votes
6y
Have a heart, the guy lost his job and that's beyond his control.
Last year I had exactly the same situation. He wanted out at the end of January which was 6 months early. I asked him to pay February's rent to give me time to find a new tenant. He paid and left happy. I ended up moving into the place temporarily for a few months. Since you're moving in to it, any court action you bring against him if you chose to do so, might not look too good for you.
0 Reply
Laura George
Investor · Pekin, IN · Member since 2017 · 47 posts · 27 votes
6y
@Robert Smith
You can always ask. But you should refer to your lease. If it doesn’t include penalties then good luck.
And you will always be money ahead to get the tenant out as soon and fast and rapid and easy as possible. Your tenant has the leverage until he moves out. Anything that you say or do can and will cost you money as the tenant is moving out. Be fair be kind and try to put yourself in their shoes.
If the tenant was a good tenant and left the place in move in ready condition then I would be happy and just rent the place out to another tenant and then make sure that there was an early termination clause in the next lease.
One of the beautiful things about being a landlord is that the tenant signs your lease. So write the lease to benefit you and then you can always give concessions if you deem it necessary.
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Laura George
Investor · Pekin, IN · Member since 2017 · 47 posts · 27 votes
6y
@Bill F.
That’s a great idea. Usually people don’t want to show their homes to the public and they make it difficult for investors. It’s very uncomfortable looking at property with tenants in it. That would be a great solution because the tenants wouldn’t have to spend money and it would mitigate the investor losses. Well said.
1 Reply
Jenna Forti
Real Estate Agent · Honolulu, HI · Member since 2020 · 7 posts · 3 votes
6y
@Robert Smith
Something similar happened to me as a tenant where I wanted to get out early because we closed early on the house we bought. The property management company told me I would be responsible for the rent if I didn’t procure a replacement tenant. I thought this was fair.
I put it on Zillow and did showings and sent the interested people links to my property management’s website where they could fill out applications. Once someone was approved I gave them my move out date and had to get it professionally cleaned and pest treated (per lease terms).
I got my deposit back, paid a prorated rent for the last month I was in there, and everyone was happy!
Hope this helps.
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Jenna Forti
Real Estate Agent · Honolulu, HI · Member since 2020 · 7 posts · 3 votes
6y
@Robert Smith
To add - if they don’t do a good job showing, they may have a harder time fining a replacement tenant so it’s in their best interest to do a good job. You can give them guidelines on making their place presentable and what info is appropriate to share when showing. This may not be common sense to a tenant.
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Account Closed
Member since 2019 · 1k+ posts · 1k+ votes
6y
@Robert Smith
For a chief operating officer, losing a job is generally earned over multiple years. And it’s generally not a low paying gig unless we’re talking startup territory (heavily stock option weighted) here.
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Michael Noto
Real Estate Agent · Southington, CT · Member since 2008 · 5k+ posts · 3k+ votes
6y
Some quick thoughts on this situation:
- if you are going to move in you may not be able to collect rent for those months from the tenant. Check your local laws
- if you end up not moving in, the tenant paying rent until you find a suitable replacement tenant sounds fair to me
- always include an early lease termination fee in your lease this way these situations are clearly spelled out if the tenants wants to exercise this option.
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Ryan SpathBusiness Member
Real Estate Agent · Boise, ID · Member since 2017 · 557 posts · 376 votes
6y
@Robert Smith
This all depends on the language of your lease. Maybe use as a learning experience and add for next one.
[email protected]208-600-2814
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Robert Smith
OP
New to Real Estate · Ooltewah, TN · Member since 2017 · 32 posts · 4 votes
6y
@Kris H.
Thanks Kris, can you provide a link to where you found this information?
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Account Closed
Member since 2019 · 1k+ posts · 1k+ votes
6y
@Robert Smith
It came from my lease
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Ricardo R.Pro Member
Property Manager · Michigan Ctr, MI · Member since 2016 · 661 posts · 581 votes
6y
@Robert Smith it's a sensitive situation but we have been there before. But here's some food for thought... what if the Tenant stopped paying rent all together until they moved out? can certainly happen and more so since the Tenant doesn't have a job and you are nearing the end of the lease. You mentioned that the Tenant will offer to find a replacement. Why not take the Tenant up on that and allow the Tenant to produce a suitable replacement? screen them and ensure they pass your criteria and that's that. If a suitable replacement is not found or not found in time hold onto the security deposit and charge up to the point of the new lease commencement date.

Regardless of what your lease says and no matter how 'well written it is to benefit you' @Laura George if 1) your lease is deemed lopsided or one-sided it is not enforceable, what you have is a beautifully written lease that will be thrown out by a judge and 2) regardless of what clauses you place in your lease regarding breaking a lease courts will require you to mitigate looses - meaning that if you hold onto the 1 1/2 month's of the security or pre-paid rent (dependent on your state) but you find a tenant within 2 weeks... when push comes to shove you will be required to return the difference and in some cases depending on your state or the judge of the day, you may be penalized - no matter how landlord friendly your state is.

We have a lease break clause in our lease which requires the Tenant to forfeit 1/2 month's rent for breaking a lease... however, we have yet to use it and instead have placed several Tenants by allowing the Tenant wanting to break lease to find a suitable replacement... it's a beautiful thing... you get an advocate in your corner willing to happily show your unit and/or find you a replacement as they have an incentive to do so and you don't have to jump through hoops to find you Tenant at the last minute. Hope this helps.
[email protected]810-844-1104
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Robert Smith
OP
New to Real Estate · Ooltewah, TN · Member since 2017 · 32 posts · 4 votes
6y
@Ricardo R. I agree. Our lease does have a clause about early termination, but we are stuck between putting ourselves in their shoes, and also making sure we are not adding more stress on ourselves. We do plan on moving back into the unit, but was not planning to so soon which causes one of our other rental property projects to have to get sped up and maybe extra money spent to have it ready in time for renters. So at the very least, we are considering not making the tenant pay extra rent, but we will keep their security deposit as a result of breaking the lease early and to allow us to have an additional month to get our other rental property ready.
What are your thoughts about that?
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