Hi, I am a fairly new landlord. A tenant wants to move out 5 months before their term ends. Technically, they are responsible for 5 more months rent, but they have been good tenants and I want to keep a good relationship with them and want them to feel they've been treated fairly. I was thinking of possibly telling them they would lose their deposit (which is one months' rent) for leaving early. Does anyone have thoughts on how to handle this situation?
Personally, I wouldn't come out and tell them that you are going to keep the security deposit. Doing so removes all of their motivation for returning the unit to you in good condition. Instead, I would tell them that you will deduct from the deposit for any time that the unit is left empty. That way, they have a financial incentive to help you get the unit rented again as soon as possible. They may even let you begin showing it BEFORE they move out. It is also worth noting that in some places, you are not allowed to charge them more of a penalty than what I describe above.
No matter what you do, I recommend a brief conversation with your lawyer so that you have a firm understanding of what you are allowed to do.
Thanks, Robert! That is great advice. Truly appreciate your help.
It is illegal to use deposits for anything except damage repairs. When a Tenant breaks a lease, which is very common, the lease should include penalties.
Tenants are legally responsible of the lease/rent until such time as a new tenant is in place.
What's "good" about them? They are breaking their lease and moving out early for whatever reason. Do you really believe they care a flying fig about you in this instance?
Legally they would continue to owe rent until their lease expires or a replacement tenant is found. The only exception would be if these are folks who are active duty military (and even then they are required to provide sufficient notice and a copy of their orders).
What you need to tell them is that to avoid them having to continue paying on their lease you will begin advertising their rental unit with the goal of having a new lease signed by the time they move out. Their responsibility is to maintain the unit so that it looks the best for showings so that it can be re rented quickly. It would also BENEFIT them financially to attempt to find a suitable replacement for themselves (you would need the final approval for anyone they find).
Remember THEY are the ones breaking the lease. Personally, I hate it when tenants view a lease as nothing more than toilet paper. Too many landlords simply allow tenants to walk out of the legal document known as a lease.
Finally, if your lease does not have an Early Lease Termination clause you might consider adding this in. This is typically a 30 day written notice and, say, two months worth of rent that a tenant can provide to "buy themselves out" of a lease. In Georgia once a tenant signs a lease with this clause and provides these funds...and even if you find a tenant the day after they move out...legally you may still keep these funds.
I went through (as a tenant) and they tried to stick me with a fee to break the lease AND the time till they placed a new tenant.... Long story short I was plenty motivated to find a tenant and get them in touch removing 99% of the work they had to do but in the end we came to a different agreement since after a lot of back and forth.
I say keep it simple, you want a tenant who is of high quality (like the ones you have) and you don't want the hassle of finding them so.... put it on the current tenant. I'd put a cap on it of enough months to get you out the winter say like 3 months. If you place the tenant sooner great reduced cost, if not here's the maximum it'll cost.
@Carolyn Sawyer why are they breaking the lease? As landlords, we sometimes forget that we are running a business. With that being said, we are all human beings and things do happen. Your goal as a business owner is to reduce turnover and keep your unit vacancy to a minimum while keeping your customers happy. Since they are good tenants, as you described them, they should help you find new tenants and work with you in showing the property to all new prospects.
At the end of the day, understand that you are running a business and your tenants are your customers. All the details in between are up to you as the business owner.
Thanks everyone for your input.
The tenant is buying a house. As a result of all of your advice, I've communicated with them about helping to find another tenant and they are receptive to that.
The reality is that state landlord tenant regulations override contract law. A lease is not 100% legally enforceable in court, no tenant can be prevented from breaking a lease, a lease is therefor nothing more than toilet paper in reality. 4 ply as opposed to 2 ply at it's strongest.
Thus the reasoning behind proactive landlords only offering M2M leases. We understand that controlling our investment, by having more control over tenants, outweighs the security mistakenly believed to exist in a term lease.
The fact is they have a contracvt with you for a certain period of time.
The reason for leases is so that you dont have a vacancy in the middle of winter when it is much harder to rent.
In my opinion, I would negotiate with them regarding a fee to cover: ANy down time in rent - about a month, advertising, cost for you to run background checks and do showings, cost of preparing the new lease, cost of move in and move out inspections.=, cost of you time screening applicants and answering all the questions over the phone, cost of preparing return of security deposit and taking new deposit, cost of a locksmith to chance locks, all in all it should be about 2 months work of rent.
The tenants have no idea what it takes to transition property to someone new. Let them know how much cost , time it takes and that they need to cover the cost of it if they leave early.
"The reason for leases is so that you dont have a vacancy in the middle of winter"
This is the misconception that landlords operate under when they use term leases. A lease has next to no bering on when a vacancy may occur. Tenants move as necessitated by life and have no regard for a lease. Life will always trump a legal contract.
I wouldn't want anyone else to try and find my next tenant except me... who knows if their standards are similar to mine.
This is your business YOU do the work! You find your next tenant.
I would tell them though they are responsible for rent UNTIL you find another tenant or their lease is up, which ever comes first.
If you wanted to buy one house could you tell the bank you're not going to pay for the one you're currently living in anymore b/c you're looking at buying a new house?
Sometimes people will have to carry two mortgages for awhile, or pay rent at one place even though they're not living there any more. In the conditions of the sale of the house THEY could've put that they were not going to take possession until their lease was up. THEY chose their possession date, you shouldn't be out of pocket for that!
Tell them they're responsible for the rent until you find a new tenant. Tell them you want written permission to show the house or unit to prospective tenants with 24 hrs notice.
These are items that SHOULD already be in your lease agreement.
Now the tenants have an incentive for you to show the unit to tenants that YOU have vetted. Plus if there's any damage to the unit when you're showing the unit, you can tell the current tenants what needs to be addressed prior to moving out, as well as if they fix it sooner there's a better chance of getting a tenant in sooner.
They are now motivated to have the unit in pristine condition, you get yourself a new tenant, everyone wins!
@Carolyn Sawyer leases longer than month to month only benefit the tenant. the tenant will leave when it suits them best regardless of your lease agreement. as mentioned, leases don't hold up in court very well. nonetheless, the last thing I would ever want is a tenant "stuck" in my rental when they don't want to be there. that will only lead to damages and neglect. as a result, I would let them go without penalty and wish them nothing but success and happiness with their new home. do not take their deposit for unpaid rent, that is illegal here in NY as well as most other places as well. I assume GA is the same.
im sure most people here would disagree with my post but that extra month or two you get in rent can easily be negated when the tenant destroys your rental out of spite. collecting those funds to cover the damage can be a real nightmare and time consuming. I would never be in this situation because I only do month to month rents. the tenant is free to leave with 30 days notice, but should I ever be in this situation I would take the "cut my losses and move on" approach.
Another example of why leases are a mirage of protection for a landlord...... they rarely actually hold up in court when the landlord tries to enforce them....but almost always side with the tenant when the landlord tries to break them....why my eviction lawyer is a huge proponent of doing nothing but M2M...... a lease is a very weak legal document when it comes to residential property
I would hold them accountable for any vacancy that occurs due to them breaking the lease.....get permission to start to show it before they leave....and motivate them to try and "market" the property to friends and family...but ultimately YOU decide who gets to move in....they still have to pass your screening etc etc...the tenant just acts as another marketing tool.
Free eBook from BiggerPockets!
Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!
- Actionable advice for getting started,
- Discover the 10 Most Lucrative Real Estate Niches,
- Learn how to get started with or without money,
- Explore Real-Life Strategies for Building Wealth,
- And a LOT more.
Sign up below to download the eBook for FREE today!
We hate spam just as much as you
Create Lasting Wealth Through Real Estate
Join the millions of people achieving financial freedom through the power of real estate investing