Lease Cancellation because of Bankruptcy

[Michael Meade]

So I have a unique situation.  I own a rental in Nashville, Tennessee.  An individual from Texas who is moving here has applied, and I approved them.  They had a lower credit score.  So I've obtained July and August rent in advance, and secured a larger deposit than normal.  We've signed a lease, and it begins on July 1, 2018.  I just mailed him the key Monday, and within 3 hours of informing him, he tells that he has declared bankruptcy but would still like to rent the place and intends to pay.  I would like to cancel the lease as this changes his credit worthiness.  He has not yet taken possession, and the lease has not started.  Does anybody know if I'm allowed to simply cancel the lease before it begins and return the deposit/rent?

Michael

[Ryan McKelvey]

Not sure what your state laws indicate, but here in North Carolina our State Bar Association approved forms have it built in to the lease agreement if the tenant files for Bankruptcy, the Landlord has the option to immediately terminate tenancy.  I would definitely consult an attorney regarding your state rental laws.  If this is allowed, there may be a stipulation that you have to terminate within a certain period of time.  Also, if he did lie on his application, this may be grounds for termination of the lease as well.  

You may be able to have the deposit forfeited upon termination of the lease agreement.  Typically rent is not earned until the month it is due, so should be retained in a prepaid account, and/or accounted for as unearned revenue until the month it is earned. Now if you are not able to secure a new tenant until after the current lease starts you may be able to charge rent until a new lease starts.  Again as things differ from state to state, I would definitely consult a local attorney.