May 14, 2019
Property Manager’s Guide to Breaking a Lease
For both landlords and tenants, written contracts — or leases — are an invaluable tool for helping both sides understand their exact responsibilities during the tenancy as well as the length of the tenancy. However, situations arise where either the tenant or the landlord may want to break the lease.
In a perfect world, your tenant signs a lease and, when lease renewal time comes around, gives the agreed-upon amount of notice that they are either renewing or moving on to a new abode. However, life isn’t always as cut and dry as that. Sometimes the tenant needs to break the lease early for one reason or another. And sometimes it’s the landlord or owner that wants out early. In either case, the other party may not be happy about ending the lease a little early. But the thing that all parties agree upon is that no one wants the time, hassle and cost of going to court.
Here are a few ways to help both parties resolve their any issues when breaking a lease.
When the Tenant Wants to Break the Lease
The laws governing landlord and tenant rights vary by state, so look to your state attorney general or consumer protection office for local guidance. (And, even in a state where it is permitted to break the lease for extenuating circumstances, the tenant may need to provide both documentation and sufficient advance notice.) Typically, a tenant can break a lease legally if:
- You fail to maintain the property in a fit and habitable way
- The rental unit is illegal
- You breach invades the tenant’s privacy or is harassing the tenant
- The tenant is an active military member and receives a change of station order
- The tenant is a victim of domestic violence
There can be a multitude of reasons why tenants may want to get out of their lease before the termination date: they might have run into financial difficulties, had a job opportunity in a different part of town or a new city altogether, had a family health crisis or the couple is getting divorced.
As a landlord, it’s a good idea to plan ahead and create a tenant-friendly lease that has an expansive early termination clauses allows your renter to break the lease for reasons not protected by state or local law. Lease termination clauses can vary, but it’s not uncommon to see options that include the ability to cancel the contract with 60 days’ notice and pay liquidated damages of two months of rent. Other times, the tenant may opt for a slightly riskier option which is to agree to give the landlord the ability to re-rent upon notice. Depending on the market, the tenant may have to move out in a matter of days or a week or two.
These types of clauses reduce friction between the landlord and the tenant and aim towards ensuring that the landlord recoups any losses.
With or without tenant-friendly clauses, it’s often in the landlord’s best interests to try to work with the tenant. If they cannot afford the rent due to job loss, it’s best they find a place they can afford. This could mean that they forfeit a security deposit for breaking the lease or chip in towards the costs of advertising the unit.
When the Landlord Wants to Break the Lease
As a landlord, you have the legal right to break the lease if your tenant significantly violates its terms or the law. This can include non-payment of rent, keeping a dog even though they have signed a no-pets clause in the lease, causing substantial damage to the property, or running an illegal operation out of the property.
However, there might be other situations where there are no issues with the tenants but the landlord wants the property evicted for other reasons. Perhaps you want to sell the property or you or a relative want to move in to the property yourself due to some reason and need it vacated as soon as possible.
If a landlord suspects they might be selling a property, much like including termination clauses for the tenant, they can include provisions that allows them to terminate the lease early, without cause.
Without this clause, they cannot force a tenant to leave during the term of the contract. However, you may offer the tenant a sweetened deal to move out early. For instance, the landlord would agree to return the security deposit (where applicable by law) and cover moving costs for the tenant with 30 or 60 days’ notice. In all cases, ensure that any clauses are written in clear understandable language, and if your tenant does agree to move out that you have their legal written permission.
Use a Lease Management System
One of the greatest time-saving changes you make at your property management company is to use an automated, lease management system. This allows you to automate monthly reports showing start and end dates, termination clauses, rent reviews and rent-free periods. Talk to us about how Property Vista can help you more effectively manage your lease cycles. Check out pricing and ask to see a demo.