How to prevent lease break by tenants?

Question

Hi all, my mountain rental house seems to attract mostly prospects who looking to move to the mountains from the city, most of the inquiries we get are "I sold my house and need rental until we find a new one" "we want to rent for a year to see if we like it there" "looking for rental until we find a home to buy" like 90% of the people who interested in this rental have one of these 3 stories. Usually these are people have money so the nice thing about it is that they have no problem to pay on time.

Our current tenant is breaking their lease because they purchased a house. we are happy for them, but don't want this to keep happening.

by Colorado law, we must allow them to break the lease and they are on the hook to pay rent until we find a replacement, and we must make active effort to find a replacement. this house is far in the mountains so finding a replacement is really inconvenient.

During screening they will say they will finish their term, but if they don't, I really have nothing to do again it.

My question: Is there a way to "force" the next tenant to finish their lease term? is it possible to add a clause in the lease agreement that will help in this case or Colorado law will overrule it anyway? other way to do that?

Any advice, experience share or opinion in this issue will appreciated.

Thanks

Nathan Brown · Answer

Nope, terms of a contract can't override written law even if all parties agree. However, you can stay ahead of this eventuality by stipulating an early termination fee. I go with 2x the rent amount in my lease and it's due in full before move out. As it's not called or considered rent, it doesn't interfere with their continued obligation to pay the rent until you re-lease it.

Greg Weik · Answer

Hi @Ray Os, my understanding of case law (not statutory, nothing is currently codified as far as I'm aware) is that the maximum "enforceable" penalty for a residential lease break in Colorado is the equivalent of two months' rent.

You need an ITF in your lease.  An Improper Termination Fee.  Do not call it rent, it's a lease break fee.

In our case, the ITF is the equivalent of a security deposit plus one month's rent.  In the lease, it's just a number, but this is how it's calculated.

In the event of a lease break, you claim the security deposit towards the ITF and send the tenant a security deposit claim form informing them they owe the balance of that ITF.  If you place good tenants they will generally pay the balance of the ITF.

In our experience, the ITF is almost always more than enough to make the client whole.  Hope that helps!

Ned J. · Answer

You can put whatever you want into the lease..... but Colorado law will supersede it...so if you put something into the lease and its not backed by law, and the tenant fights it, you lose.

The big issues becomes actually getting the $$ from them.... the lease states they have to keep paying the rent in the lease, but getting the actual payment is a totally different ball game.

Ben Rhodin · Answer

Hey @Ray Os! Unfortunately, most of this is just part of doing business, kind of like trying to prevent returns at a store. However, one thing to note is that them purchasing a home is not one of the legal situations to break a lease, so they are entirely still on the hook for the remainder of the lease. Sure you are to make "reasonable" efforts to rerent the unit, however, they are on the hook until you find that new tenant, and you are not required to lessen your criteria or anything like that. So if it takes you 5 months to find the new tenant that is on the old tenant. So you really aren't under any financial strain due to their choice to break the lease. Unless of course they don't pay, but then you have their security deposit and can take them to court.

Personally, I wouldn't try to mitigate getting these tenants unless you are very much hating rerenting the unit, and just don't like the extra work. There are two things you could do.

1. Take the first month's rent, last month's rent, and a security deposit equal to one month's rent upon signing of the lease. This way you have two months of rent in case they up and bail on you and don't keep paying. And you have those two months to find a new tenant or take them to court.

2. Put the responsibility to find a new tenant on the tenant. You can allow them to "sublet" the property with your approval. So instead of you finding the tenant, now they are responsible for that, and still have to be on the hook for their term.

Kevin Sobilo · Answer

@Ray Os, does Colorado law allow you to charge a fee when they terminate early? I charge a fee of $800-1000 for early termination of a lease here in PA. The justification is the cost and effort it takes to prep the unit to rent again and then to advertise, vet, and sign another tenant to a lease. This makes me "whole" o the turnover when a tenant breaks it early if rent is paid until the next tenant is in place.

Another option is to offer the tenant an alternative option for breaking the lease. Offer that they pay 2 months rent and be done with it, knowing that you can with reasonable effort replace the tenant in less time and come out a little ahead. This should be legal because its a choice for the tenant and allows them to lock in a certain outcome rather than take the risk it will take you longer than 2 months to replace them.

Ray Os · Answer

Thank you, that is a great idea, can you share with me the clause you are using for this termination fee in your lease?

How to prevent lease break by tenants?

Most Popular Reply