Tenant Can't Pay Early Termination Fee

[Joel Mora]

I have a house in Seagoville, and my tenant let me know on July 6 that they need to move out on July 20th. The reason she mentioned is that her grandmother in another state is sick with cancer, having a surgery, and she needs to take care of her. In her message, she said that she will return the house to me as it was when she received it and that I can keep the security deposit. 

However, I have an early termination clause in my lease that is 2x rent. She didn't know  and she said she would get back to me about getting the money. So far, it seems like she won't have the money for the termination fee and she is definitely leaving on the 20th.

Overall, she's been a good tenant with no issues, but it took me a long time to get this house rented and I'm not sure with such short notice how fast I can get it rented again. 

My question is what do i do about this fee? Do I contact a lawyer or collection agency if she doesn't pay it? That seems like it will cost me more money and time but I can really use all the money I can get with such a short turn around and the small margins the house makes already. I haven't mentioned collections or lawyers to her yet because I want to keep the communication open and amicable and make sure she continues to respect the house, but I don't know what to do. I also don't live in the state where the house is.

[Kevin Sobilo]

@Joel Mora, I personally do not show units until they are vacant and prepped again. You don't know the condition until they are moved out and it might take only days or it might take weeks to prep it for the next tenant. So, short notice isn't really an issue in my mind as that really costs me nothing.

What does cost me is a tenant who doesn't stay very long. If a tenant signs a year lease and only stays 4 months, I incur excess vacancy with the additional turnover. However if this is a tenant who stayed 4 years, they have exceeded my goal for an average tenant stay and I'm not disadvantaged by their early departure.

I only look to unconditionally enforce my early termination fee with an eviction otherwise I will negotiate with the tenant. For a long standing good tenant I may even waive it.

In your case, it sounds like they can come up with something. Assuming no damage, you already have half of your fee covered by the security deposit. So, anything more you can get from them is gravy especially if they have been with you over 1 or 2 years. 

[Joel Mora]

Quote from @Kevin Sobilo:

@Joel Mora, I personally do not show units until they are vacant and prepped again. You don't know the condition until they are moved out and it might take only days or it might take weeks to prep it for the next tenant. So, short notice isn't really an issue in my mind as that really costs me nothing.

What does cost me is a tenant who doesn't stay very long. If a tenant signs a year lease and only stays 4 months, I incur excess vacancy with the additional turnover. However if this is a tenant who stayed 4 years, they have exceeded my goal for an average tenant stay and I'm not disadvantaged by their early departure.

I only look to unconditionally enforce my early termination fee with an eviction otherwise I will negotiate with the tenant. For a long standing good tenant I may even waive it.

In your case, it sounds like they can come up with something. Assuming no damage, you already have half of your fee covered by the security deposit. So, anything more you can get from them is gravy especially if they have been with you over 1 or 2 years. 

Thanks, Kevin! I was leaning to negotiating as well, but I will say that this tenant falls into your former category where she's only been in the house for 4 months.

[Melanie P.]

@Joel Mora What you are required to do is to make a commercially reasonable good faith effort to turn the unit after they leave. Keep copies of your advertising, any repairs, etc. In the end you will prepare a reconciliation of the tenants account which includes rent up to the day a new tenant moved in, the lease termination fee, credit for the security deposit and see if she pays it. If she doesn't you can pretty much either turn it over to collections or give up. You have little recourse to collect a judgment in Texas.

[Russell Brazil]

How about responding like a human with a heart would, instead of someone trying to squeeze every last cent out of someone with a dying family member?

Want to understand why our industry is reviled by most people? Just read your own post.

[Joel Mora]

Quote from @Russell Brazil:

How about responding like a human with a heart would instead of of someone trying to squeeze every last cent out of someone with a dying family member?

Want to understand why our industry is reviled by most people? Just read your own post.

Wow! I'm surprised to see you're a moderator because it seems you lack some reading comprehension. If you read correctly, you will see that I have not responded to my tenant in anyway that isn't compassionate. I've only pointed out the early termination clause on a 4 month old tenant.  And I'm not trying to squeeze every cent out of a tenant. I just let her know that she signed a contract that has a clause specifically for this situation. Unfortunately i do have expenses and I'm already losing money on this house. If i get the house rented before the end of the month then I have no problem but it's not looking that way. And as a person who is very familiar with cancer I know that it's not a situation that involves breaking all commitments within 2 weeks so I do have my reasons to be skeptical. 

I came to this forum to see what the worst case options are for me if I need to go that route. I thought Bigger pockets was about knowledge and information but I guess for you it's about passing judgement without truly grasping the context.  

[Russell Brazil]

Quote from @Joel Mora:

Quote from @Russell Brazil:

How about responding like a human with a heart would instead of of someone trying to squeeze every last cent out of someone with a dying family member?

Want to understand why our industry is reviled by most people? Just read your own post.

Wow! I'm surprised to see you're a moderator because it seems you lack some reading comprehension. If you read correctly, you will see that I have not responded to my tenant in anyway that isn't compassionate. I've only pointed out the early termination clause on a 4 month old tenant.  And I'm not trying to squeeze every cent out of a tenant. I just let her know that she signed a contract that has a clause specifically for this situation. Unfortunately i do have expenses and I'm already losing money on this house. If i get the house rented before the end of the month then I have no problem but it's not looking that way. And as a person who is very familiar with cancer I know that it's not a situation that involves breaking all commitments within 2 weeks so I do have my reasons to be skeptical. 

I came to this forum to see what the worst case options are for me if I need to go that route. I thought Bigger pockets was about knowledge and information but I guess for you it's about passing judgement without truly grasping the context.  

 You're asking if you should send someone to collections because they have to move to take care of their grandmother dying of cancer. You need to reread your own post, and learn how to be a human being. 

[Theresa Harris]

Some people lie to get out of things, so you don't know if her story is true or not, but why not just go with she's telling the truth.  If she doesn't have the money to pay 2x the rent, have her pay 1x (or if you can get it rented for Aug, refund her the difference so you aren't collecting double the rent).  She would have money for Aug rent, if not red flags because what was she going to do if she stayed.

Her leaving on the 20th means you have some time to go in and clean it up (probably not much to do as she was there for 4 months) and maybe get it rented by Aug 15.

[Andreas W.]

@Joel Mora

If she sounds sincere to you, I say let her go. Her life just became miserable enough. You already get half of the 2 months fee. Just explain to her that the house must be in great condition at move out, and get her new address.

[Nathan Gesner]

I have a termination policy and a penalty. However, the law requires me to find a replacement renter was quickly as possible and minimize the financial impact to the tenant. My process:

I tell the tenant of the termination policy and penalty. If they can't afford it, I focus on finding a replacement tenant and charging the departing tenant with rent up until the new tenant takes over. I at least try to avoid losses caused by the departing tenant.

[Chris Seveney]

@Joel Mora

This is the area of real estate where most of it lies, which is in the gray area (unlike every guru telling you it’s black and white).

I would first show some sympathy and let them know sorry they have to go through this.

Next I would schedule an initial inspection of the unit asap to make sure it’s not trashed. If it’s in good shape I would list it for rent asap. I would also let them to to minimize costs incurred can we work together if I get someone who wants to look at the unit we get them access.

Try and get it rented asap. Then once rented see what your damages are and then see if it’s worth doing anything then.

I assume the security deposit is one month.

[Don Konipol]

Really depends on (1) if the tenant is being honest and hasn't fabricated the story for sympathy in getting out of the lease and (2) if the tenant is telling the truth the financial condition of the tenant (struggling to make payments vs having $2 million in an IRA). If tenant is typical without a lot of money, and being honest, I would reach a reasonable settlement and not add misery to their life.
I’m sure when the OP thinks about it they will reach a similar conclusion. 

[Lynn McGeein]

@Joel Mora what condition is the home? If it shows well, tell her you’d like to advertise the unit and schedule a day/time window of showings asap and that you can be flexible or even eliminate the early termination fee if you can rent it quickly. If she doesn’t want to let you show it, then that’s fine but you’ll need to be more firm on the termination fee, maybe reduce fee due to special circumstances if she leaves it in great shape. I’ve had 2 tenants have units in excellent shape for my showing day when they wanted early termination. One turned over in less than a day, I got keys in the morning and new tenant got keys at 6pm after some cleaning and touch-up paint. Applicants asked me if I staged that one. So it’s possible to work with her to help both sides, and if not, at least you tried to help.

[Alex Marsh]

Quote from @Russell Brazil:

How about responding like a human with a heart would, instead of someone trying to squeeze every last cent out of someone with a dying family member?

Want to understand why our industry is reviled by most people? Just read your own post.

 I agree with this.

I had a forty-something tenant with a young family sign a two year lease and three months later they got their student loans forgiven and could finally make their lifelong dream of homeownership come true. Who was I to stand in their way and try to prevent them leaving or enforce the terms of the lease? They acted in good faith when they took out the lease and could never have predicted the good fortune life handed them. Your tenant is not leaving for a fortunate reason. I always try to act with the best intentions with my tenants.

Hopefully you will find someone to replace them soon after they leave.

[Corby Goade]

What a terrible situation for your tenant. 

I'd waive the fee, tell them I am sorry they are dealing with such an awful thing and get that place rented again asap. 

Best of luck. 

[Melanie P.]

I'm surprised by the poor advice in this thread. Your job is to administer the lease. Collect what is due on the lease and enforce its various terms and conditions. Any balance left over take her to small claims court so when she inherits you get paid. It is not our job to subsidize family emergencies or let someone buy a home when they already committed to a lease term. Ridiculous.