As landlords, we want some amount of tenant stability; after all, tenant turnover is a cashflow killer. Very rarely will we sign a lease for a term of less than one year or allow tenants to break a lease without a very good reason. We just want the general comfort of knowing that we likely will not have to worry about that particular unit for at least a year.
Sometimes, however, tenants want to break their lease. By “break” I mean move out before the lease term is expired. The reasons for this are often quite varied and range from “I just don’t like it here anymore” to “I lost my job.” With the first example, we have to get our tenants to face the hard reality of the lease by explaining to them again that they have signed a contract which we expect them to uphold. We make them understand we really cannot force them to stay, but that there will be penalties if they do not get the OK from us to break their lease.
The second example, however, is a different matter. There are times when we will let a tenant out of their lease, and job loss is one of those potential reasons. I explain why below and also provide you with four other reasons we allow a tenant to break their lease.
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5 Legitimate Reasons to Allow a Tenant to Break Their Lease
They Are Active or Reserve Military
Active and reserve military personnel can be transferred or activated very quickly. If they have to go, there is really nothing you can do, as Federal (and often State and local) laws allow these tenants to break any lease. In fact, you might even be required to hold their property for them so it will be there when they return. Be sure you understand the potential ins and outs of these laws.
They Get a Job Transfer
A job transfer is not the tenant’s fault, and it can often be a good thing for them. Many times they have very little control over where the particular company they work for sends them (unless they just up and quit), so there really is no reason trying to enforce your contract here. It is very unlikely that any sitting judge would actually allow you to do so anyway.
As a cautionary measure, it is wise to place a clause in your lease that allows for the lease to be broken due to a job transfer so long as the transfer is over 50 or so miles away. After all you don’t want them to move if they are just transferring to another local branch.
They Lose Their Job
If a tenant loses their job and generally has no prospects of finding replacement income in the near future, we have found that it is best to generally let them move on. After all, you are not going to get blood from a stone. If a tenant has lost their income, their relationship with you is likely to become more and more strained as time goes on and resources dry up. Best to sever the relationship early, get your property back and move on down the road.
They Encounter Extraordinary Circumstances
Unfortunately, bad things happen to good tenants. We have had tenants get divorced, get diagnosed with cancer or suffer some other type of misfortune. These types of circumstances can cause radical shifts in income and outlook on life in general.
Suddenly the rent is not that big of a deal if you are fighting for your life or trying to survive a bitter breakup. It is best to have a bit of sympathy here and let folks move on and focus on whatever they might need to focus on.
They’re Simply a Pain in the Neck
Some tenants just end up being a pain in the neck. They seemed like a good fit during the application process, but once they move in, nothing is ever right for them. Nothing can ever be fixed properly, they complain constantly, they are late with the rent and other payments. They are just a pain in the neck and sometimes enough is enough.
When is that point reached? It is hard to say, but sometimes it is best to just say something like, “I do not think this is the home you are looking for, as I cannot seem to meet your needs. I will be happy to let you out of your lease so you can find something that better fits your needs.” They will either move and you will be rid of the problem, or they will tone themselves down. Either way, hopefully your problem is solved. Sometimes it is just better to get out of a bad tenant relationship.
In sum, we try not to let our tenants break their lease for foolish reasons, but we do understand that sometimes it is a necessity due to circumstances that may be beyond their control or for us to get some peace of mind. How and when you decide to allow your tenants to break their leases will be up to your local laws and your own personal opinions and business practices.
Whatever you decide, keep the lines of communication open and try to maintain a good rapport with your tenants. Let them know that they can come to you if they need to discuss any situation. Don’t get angry. Keep everything professional and business like. After all, sometime breaking a lease is good for both sides.
[Editor’s Note: We are republishing this article to help out the landlords who have found BiggerPockets more recently.]
Now it’s your turn to weigh in: Have you been forced to break leases with tenants? If so, what were the reasons and were you happy with your decision?
Leave a comment below!