Tenant wants to Break Lease to move to another house

[Shelly Rike Mitchell]

Tenant who has been in property for 6 months came to us and wants to break his year long lease to move into another house in the same neighborhood. This neighborhood is a new development of duplexes. Our property is a duplex with 2/2 units and he wants to move into one of the 3/2 units. Other property owners have been running specials on rent to fill the vacancies, charging the same rent of $1200 that he signed a lease with us for the 2/2. Now other 2/2 in the neighborhood are running Rent rates of $1100-1150. We offered for him to break the lease if he lost his deposit and paid a penalty of one months rent. We also offered him a deal that if he signed another year lease we would reduce rent to match market rates of $1100. Now he wants to negotiate to $1050. I think we are already being generous. Thoughts? 

[Nathan Gesner]

Pay the termination fee or stick with the original agreement.

On the other hand, you may consider lowering your rate and encouraging him to stay. Why? Because if he chooses to leave, you'll have to look for a new tenant. It will be hard to find a new tenant willing to pay $1200 when neighboring units are charging $100 less. You will have to lower your rate to compete. You may end up sitting vacant for a month or more, then finally place a renter for $100 less than what you currently get. In other words, it may be cheaper to drop your rate $100 and keep the current renter in place.

Sit down with paper and consider the costs of each decision.