“What To Do When Lease Break Happens” written by Mike Marko.
Do you have a tenant who is threatening to or has committed a lease break?
Even if you are the best property manager, there will always be unexpected moments that happen while managing your rental property business. One of those unexpected moments would be the time when your tenants commit a lease break.
Whatever their reason for wanting to break the lease, you have to be prepared for the challenges you may face when it happens. Do you know what actions you can do when one of your tenants commit a lease break?
If you are not prepared for a tenant’s lease break, then let me discuss with you about what you should do in the event of a lease break.
Actions To Take In Dealing Lease Break
When a tenant signs a lease agreement with a property management firm both parties are committing to a legal contract. This legal contract is enforceable in a court of law.
However, sometimes a tenant will request to break the lease and ask to move out of the property prior to the ending of the lease period. Breaking of a lease is a frustrating inconvenience for a property manager. When the tenant requests a lease break, even if you don’t want this to happen, you won’t have any choice but to deal with the situation.
If you haven’t encountered a situation like this before, it will also be best if you have an idea what actions you can do when a lease break occurs.
What Is A Lease Break
When a lease break happens it means that the tenant will move out earlier than expected… leaving you with an unexpected vacancy.
Reasons for lease break may vary but the most common causes of this are job transfers, divorce, and loss of a job. The only accepted and valid reason according to the court for a lease break are when a person is taken or slated to participate in a mandatory military service.
Death of the individual listed on the lease agreement if listed in terms could also be a valid reason recognized by the court for a lease break. If others are living in the unit you may be able to transfer the lease to those individuals if requested. However, the person’s estate would be required to fulfill the requirement of the lease as long as it is stated in the terms of the lease contract (or is covered by your local governing laws). The landlord should compensated if the rental property becomes a temporary “storage unit”, while the estate is being figured out.
Here are examples of a lease break:
- Lease break committed by the tenant – Let’s assume that you have a tenant who’s renting your property for a year. However, the tenant decided to leave and vacate the rented property on the 9th month of their 12-month contract. This act is considered as lease break because the tenant didn’t wait until the specific end date of their residency on their rental contract. In this scenario the tenant would be responsible for 3 months of rent payments to fulfill the lease contract.
- Lease break committed by the property manager – A property manager can also commit lease break. Selling a property that still has renters is considered as lease break. In this case the property manager must inform the tenant of the pending sale and reasons to vacate the property. As long as you follow all the legal requirements required, then the court will allow this type of lease break. However if you don’t follow the legal requirements to lease break due to sale of the property then the lease break is considered illegal because the property manager violated their agreement written on the rental contract.
A lease break can affect both parties. For a property manager, it is a serious incident that causes an unexpected vacancy that needs to be addressed and taken care of. For the tenant the lease break can bring legal actions against them for not honoring the entire length of the lease contract. Either way when a lease break occurs you must be prepared to re-rent the property as this could cause unnecessary and expensive costs for your rental property business.
There are often many ways to avoid or prevent your tenant from committing a lease break as I will explain in the next sections.
Explain The Consequences Of A Lease Break
It is highly recommended that prior to renting the property to a new tenant that you should explain in detail the legal actions that could occur if there is a lease break caused by the tenant. The best time to have this detailed conversation is before a tenant moves in and prior to the tenant signing the required lease agreement or contract.
Going over and explaining until the tenant understands that they are required to follow the rules that were discussed in the agreement is a key way to avoid a lease break. Often times when a tenant rents a property they don’t read or understand what can happen when a lease break occurs due to the tenant. A majority of the tenants renting units never read the terms of the contract they signed and are not aware of the consequences that they should face once they wanted to do a lease break. Often a tenant might they clearly know and understand that they must stay in the rental unit for the full lease term but they could assume that they could still leave whenever they want to, no matter what the contract states..
To help the tenant understand and know that they should face legal consequences when they commit a lease break, you should again explain it to the in detail prior to signing the rental contract. Explain the terms of the contract they are signing and let them know they are agreeing to all terms of the lease agreement. It would be best to detail the consequences they would face legally if they will break the lease. If the contract allows explain that they would be required to find a subletter approved by your management company. Also if the contract terms state that the tenant could lose the security deposit or if they would be required to pay rent for the remaining months covering the lease break terms.
Note that the tenant is still responsible for the utilities during this period. If it’s winter, then the tenant is still responsible for providing heat to the home to prevent the pipes from freezing.
As a property manager, you should be watchful for every clause that was stated in your lease agreement. There are some instances where an “early termination” clause is included in the lease agreement. An “early termination” clause means that the tenant is allowed to get out of the lease even before the lease term ends. If you are not in favor of this clause, make sure that this is not included in the lease agreement.
Require The Tenant To Give You A Notice
If the tenant still wanted to break the lease, you should require the tenant notify you of their decision via a written early lease termination request. In their request, they should explain the reason why they wanted to leave. There are some instances wherein a property manager is not required to release a tenant from the lease. These instances include having loud neighbors, having a job in another area, inconvenient parking, or moving in with a significant other.
There are also instances where breaking a lease will not cause a tenant to suffer from any penalty. These instances are due to the property manager’s negligence in taking care of the rental unit. This is why a property manager should be consistent in keeping the rental units a safe and habitable place for tenants because this can be a satisfactory justification for a tenant to break the lease. Furthermore, you can also allow a tenant to break the lease if the tenant is leaving for military duty or relocating because of an employer-mandated job change. To get to know other specific legal exemptions, you should check your state laws.
Remind The Tenant That The Responsibilities Retain To Them
Even if the tenant is about to leave the rental unit, you should explain to the tenant that the responsibilities for the damages and payments retain to them until the lease term ends. This means that they will be responsible for the rental unit even after they left (even if they found a subletter). The lease is a legally enforceable document which states that the tenant will take charge of the possession for an agreed amount of time in exchange for rent to be given to the property manager.
In most states, when a leaseholder breaks the lease, a property manager is required to start searching for a new tenant. That means you need to start actively looking for a replacement tenant.
Seek For Legal Advice
If you are not familiar with facing situations like a lease break, the best option would be to seek legal advice. After all, a lease break will put a property manager in a difficult situation and it’s best to know your rights (and the tenants’ rights). Be sure to seek help from a professional who is knowledgeable in the ins and outs of the landlord laws in your state. This way, the professional could give you the right advice about the action you should take while dealing with a tenant’s lease break.
A professional will also help you understand all your options when dealing with this kind of situation. They can not only help you with the present lease break, but also offer suggestions to help you with future lease breaks. A professional could help you in gaining more knowledge about the laws in your state applicable to the rental property business.
Final Thoughts On What To Do When Lease Break Happens
A lease break can put a property manager into a difficult situation. And that’s the reason why you should know the right actions you should take when dealing with this kind of situation. Explain to your tenant the consequences of breaking the lease, and require them to explain their reasons for leaving.
If you are still not sure about the right action you should do in dealing a lease break, it’s also best to seek a legal advice. A legal professional (with property management legal experience) has a broad knowledge of the different state laws and the rental property business.
Have questions and want to connect?
Add me on Facebook then shoot me a message:
1. Basic Guide On Landlord Rights And Responsibilities
2. Knowing Your Tenants Rights
3. How To Do A Simple Lease Agreement
Disclaimer: This commentary is a matter of opinion provided for general information purposes only and is not intended to be taken as investment or trading advice under any circumstances. Information and analysis above are derived from sources and utilizing methods believed to be reliable, but we cannot accept responsibility for any losses any person may incur as a result of this analysis. Individuals should consult with their personal financial advisers. By using this web site or any information contained in it, the user specifically and expressly agrees that no advisor-client relationship is created between said user and any author, owner, executive, or principal of this web site by either use of this web site, or by any information, product, or service offered by or on this web site. No express or implied guarantees or warranties as to investment or trading results are made, and any perceived insinuations of such are hereby expressly disclaimed.