Greeting,
Tenant of mine who has 2 months left on his lease just sent me a text saying he will be out of the property June 1st as he has to move out of state for his job where employment is more stable.
Curious how likes minds would handle this situation.
Tariq
If you handle this correctly, you should minimize your losses and possibly profit.
First, I would thank him for letting me know and politely ask for his new mailing address for the deposit statement. That way if you get an accurate address and he still owes you money, you can get him served papers later. Might need to find a law firm that has a partner firm in his new home state to get that done, but at least you have a start. You might also casually, "Congratulate" him on the new job and ask where it will be so you have an employer to send a garnishment notice.
Once you have the very useful information, I would ask, "How would you like to arrange for payment of your remaining obligations due under the lease?" See what he says. He might offer payment on the spot. If he doesn't, then you can try a couple of different things that have worked for me:
1) Offer him an easy, no fuss, no foul early out with an Early Lease Termination (ELT) fee. Since there's only about 2 month's left, make it small enough to encourage him to pay it, but high enough to help offset your losses in addition to any charges against the security deposit. Maybe 3 weeks of rent? It's a clean break and doesn't result in any negatives on his record and he can still use you as a reference in the future. I have an early termination fee built into my lease, but it is 6 weeks of rent. I can usually find a new renter in 2-3 weeks, and the fee helps compensate me for the extra hassle factor an early move-out creates.
2) Offer to re-rent the unit on his behalf, but of course he still owed rent thru the last day of the lease if no replacement tenant is found, and furthermore he would still be responsible for the advertising, utilities and any damages due to break in, vandalism, etc just as if he were still living there as an occupant.
I use these risk points and also the unknown total costs of option 2 to "sell" the Early Lease Termination fee. It sounds a whole lot more reasonable to pay the fee and have a clean break.
Btw, neither the law of my state nor my lease agreement allow the tenant or me to use the security deposit toward the rent or early termination fee. The deposit cannot be touched until the lease ends, so until the fee is paid the lease continues. The security deposit is for damages and unpaid charges post-lease, not for paying things during the lease.
If you handle this correctly, you should minimize your losses and possibly profit.
First, I would thank him for letting me know and politely ask for his new mailing address for the deposit statement. That way if you get an accurate address and he still owes you money, you can get him served papers later. Might need to find a law firm that has a partner firm in his new home state to get that done, but at least you have a start. You might also casually, "Congratulate" him on the new job and ask where it will be so you have an employer to send a garnishment notice.
Once you have the very useful information, I would ask, "How would you like to arrange for payment of your remaining obligations due under the lease?" See what he says. He might offer payment on the spot. If he doesn't, then you can try a couple of different things that have worked for me:
1) Offer him an easy, no fuss, no foul early out with an Early Lease Termination (ELT) fee. Since there's only about 2 month's left, make it small enough to encourage him to pay it, but high enough to help offset your losses in addition to any charges against the security deposit. Maybe 3 weeks of rent? It's a clean break and doesn't result in any negatives on his record and he can still use you as a reference in the future. I have an early termination fee built into my lease, but it is 6 weeks of rent. I can usually find a new renter in 2-3 weeks, and the fee helps compensate me for the extra hassle factor an early move-out creates.
2) Offer to re-rent the unit on his behalf, but of course he still owed rent thru the last day of the lease if no replacement tenant is found, and furthermore he would still be responsible for the advertising, utilities and any damages due to break in, vandalism, etc just as if he were still living there as an occupant.
I use these risk points and also the unknown total costs of option 2 to "sell" the Early Lease Termination fee. It sounds a whole lot more reasonable to pay the fee and have a clean break.
Btw, neither the law of my state nor my lease agreement allow the tenant or me to use the security deposit toward the rent or early termination fee. The deposit cannot be touched until the lease ends, so until the fee is paid the lease continues. The security deposit is for damages and unpaid charges post-lease, not for paying things during the lease.
I would keep the deposit, if your state allows it, and move on. At least he made it 10 months. Stay on good terms - so he doesn’t trash the place on the way out.
The alternative: take him to small claims court in the new state and hope to win a judgment. Then realize 80% of small claims court judgements are never collected and how much effort this would take. Not worth it!
@Erik W. awesome response, thank you! Definitely have given me a few things to consider.
I was just going to keep the deposit I don’t believe that is illegal on my state but I will need to verify that.
If you plan on keeping deposit, make sure you follow your landlord/tenant requirements, usually means itemized statement on deposit deductions mailed within x days to last known address. My state requires it, and if I don't send the statement, tenant has right to full deposit back. If a tenant tells me they're leaving early, I do try to work with them as at least they let me know.
Celebrate at least a little. They didn’t take advantage of the eviction ban a month or two and aren’t trying to take advantage of it now. You should have a new tenant within a couple weeks of them moving out so you collect a couple weeks of rent from their deposit (assuming it’s allowed in your area), cover the make ready and probably have some left over to refund to tenant
@Tariq B.. "Congratulations on your new employment. Make sure to send me your new address asap for where to return your damage deposit". Of course, the entire idea is that you'll be keeping his damage deposit for any lost rent and/or repairs, but it will be nice to also be able to send him a bill and/or have an address for small claims court. "Now, per the lease I will need to list and show your place immediately so I can get a new tenant. I will give you a 24 hour notice for showing, also as per the lease. Let's keep in touch daily so we can make this a smooth transition for each of us".
In reality, you need to mitigate your possible losses asap. Hopefully the unit is in good shape, and his damage deposit covers the lost rent until you can get a new tenant. I wouldn't get mad, or get nit picky just to keep the damage deposit because he "screwed" you. Life changes happen. Roll with it, hope for the best for him, and especially do the work to minimize your losses.
Heres how I would handle it. Check my lease for wording on ending leases early. There may be terminology about what he is liable for etc.
In Oregon we have to diligently try to rent the unit and we can not have outgoing and incoming tenant pay remt for the same time frame.
Usually I can rent the unit quickly which means outgoing tenant is only paying the time frame when it was vacant up to 2 months (per my lease and state law)
good luck! .
Also want to add that I talk frankly with my tenants and tell them exactly what they are responsible for. I never keep them in the dark.
For example the only time I have not been able to rent the unit right away was over the christmas holiday and my tenant kept paying rent even tho he didnt live there.
After the new tenant signed the lease i refunded any rent and deposit that was due tenant.
Basically tenant needs to continue paying rent as you try diligently to mitigate his damages.
@Tariq B. Long post sorry:
Honestly I think you are getting bad advice here in combining both ideas: increasing profit and preventing losses. I’m picturing a judge looking at you going “really?”
Carrots make sticks stronger. I suggest an alternative TONE:
I’d go with what people say as to collecting the information, and I think your main goal is to minimize losses. You have been given a heads up that the tenant is having exonomic uncertainty, that’s valuable.
Your worst case scenario is a non paying person in the apt. You want them to move! You also want them to be cooperative in showing and not careless about about damage which could delay filling it. Avoiding those scenarios should be your priority . You are profitable with a vacancy reserve yes? Things like this is what is for
you could say you really appreciate the advance notice, you will work hard to rerent it and with his cooperation you think you’ll be fine. Inspect, flag security deposit level damage. Let him know you will be as fair as possible and aren’t looking to profit you just want to minimize damage Then, when he is out use the security appropriAtely.
Return the deposit minus the economic damage as legal. And give him a discount on the damage telling him you did it because of his cooperation. Personally, I’d let it go purely from an effort/reward perspective but if you do it right he will wind up thanking you for only deducting partial rent.
Before the cry of “this is a business” starts successful businesses make these risk reward calculations all the time. CFOs have line items for them. Speaking sofftly doesn’t mean you are soft. You still have the stick.
I read it first in a Jay hinrichs post “wanna be
Right or rich?”
Thanks for all the awesome replies everyone always like to hear others ideas.
This was a tenant I inherited a few months back. Along with the lease. The lease stated forfeiting deposit if you do not withhold the terms of the lease.
I told him good luck in this new chapter in your life and for the few months I was your landlord you made it easy. Because you did not finish out the lease you will have to forfeit your deposit. I would like to add if you need a reference please kindly consider me as I have nothing but kind words to say.
He responded that he already figured he would not be getting his deposit back and that he really appreciated it.
I think this is a blessing honestly. I can now get in there and bring the unit up to my standard and begin another phase of the value add approach.
thanks again everyone