Tenant Trying to get out of Lease Early

[Stephen DeFalco]

Hello Fellow Landlords,

I have a tenant who had a one year lease ('23-'24) with us and was great. This past spring she re-signed for a 2 year lease with us (4/1/2024-3/31/2026). She informed us a few weeks ago that she got another job that is forcing her to move (still in Chicago-metro area) and she'd be moving out in September. In turn, that would be the last month she'd be paying rent. We explained to her she could find someone to sub-lease with our approval but one way or another she was on the hook for rental payments through the end of her lease and she seemed unaffected by potential legal action if a suitable sublease was not found.

Anyone have any advice on this situation?  

Thanks 

[Randall Alan]

Quote from @Stephen DeFalco:

Hello Fellow Landlords,

I have a tenant who had a one year lease ('23-'24) with us and was great. This past spring she re-signed for a 2 year lease with us (4/1/2024-3/31/2026). She informed us a few weeks ago that she got another job that is forcing her to move (still in Chicago-metro area) and she'd be moving out in September. In turn, that would be the last month she'd be paying rent. We explained to her she could find someone to sub-lease with our approval but one way or another she was on the hook for rental payments through the end of her lease and she seemed unaffected by potential legal action if a suitable sublease was not found.

Anyone have any advice on this situation?  

Thanks 

@Stephen DeFalco

We take a slightly different approach… We also advise them that they are on the hook for the lease, but instead of putting the burden on them to sublet it, we tell them that we will turn on our marketing and fill it as quickly as possible, and that as soon as we can get someone moved in, they would be off the hook (as it was). 

Typically given 30 days advance notice we can find a tenant and fill the unit within less than two weeks of the old tenant exiting. It’s usually a win-win for both sides.

Our goal is to not have any lost income due to them breaking their lease, and not so much penalize them for a change in their circumstances.   Personally we wouldn’t want the tenant trying to find a new person to fill the lease, as we think we have a better idea of who we want from screening applicants and we have a way to advertise for them. It’s very likely a tenant would have limited resources to be able to market the property.

hope it helps!

Randy

[JD Martin]

1. Never bother with a lease longer than a year. We convert all one year leases to month to month at the end of the lease. As you can see people move when they want, not when their lease expires.

2. You can hardball it, or just prepare for the inevitable. I would offer them a redo on a M2M, perhaps at a little higher rate, and tell them if they don't go that route you will go hardball when they illegally break the lease. 

3. We offer early termination for basically all leases, which is 1 month plus the deposit if there's no damages. 

[Nathan Gesner]

I agree with JD. Stick with a one-year lease. Tenants signing longer leases tend to break them more often than not. One year also helps you maintain a schedule for inspections, rent increases, preventative maintenance, etc.

If your lease doesn't have an early termination penalty, then the only thing you can do is start marketing and find a replacement tenant. Let the departing tenant know that she is on the hook for the terms of the lease until a new renter takes over. If she leaves September 15 and the new tenant doesn't start until October 1, then you can hold her responsible for rent, utilities, and other costs through September 30th.

Don't wait for problems to happen before developing a plan. Create an early termination process now. Figure out how you will handle an abandoned rental with no notice, $5000 in floor damage from an unauthorized pet, or complaints of mold. You can read the forum and create a list of the 30 most common problems, then study how to handle them and develop a plan for each in less than a year. Your life will be so much better!

[Travis Timmons]

Don't hold your tenant hostage. If she wants to leave, she is going to. I may be a little too lax on this, but I've never regretted letting tenants out of their lease when something changes in their life and/or they don't like living there. In the few times that it has happened, we've been able to fill the vacancy within a week or two.

I may also have a different perspective because at 25, I had a failed business and moved across the country for a new job. My landlord stuck me with an early termination that amounted to about half of the cash that I had on hand. It knee capped me financially. I was broke, just wrote a $1600 check to get out of my lease, and had to spend the money to move across the country. The mom and pop landlord that I rented from (by my calculation and internet research) owned about 50 doors and had for a long time. Part of the reason to build wealth is to not sweat 1-4 weeks of lost rent. With 30+ days notice, she is being fair and reasonable as well. Treat people fairly and go find a new tenant. 

[Paul De Luca]

@Stephen DeFalco

I agree with the other posts here. If you don't already have an early termination clause, consider finding or creating a lease that does. I recommend letting your tenant go in peace and stick with one year leases in the future. Personally, I start all my new tenants with 6 month leases to test out the relationship before considering a one year renewal. Realistically it's going to be difficult for you to actually collect the remaining rent amount if the tenant refuses. And legal action will be costly plus likely not yield much in terms of positive results.

Best to just move on and find a new tenant. Start showing the apartment now so you can get it turned over quickly.

[Gregory Schwartz]

@Randall Alan that is the winning formula. 

I've had tenants come into my office visibly nervous about having to break their lease. Once I explain our process, the relief that washes over them is magical.

Here's how we handle it:

• We charge an admin fee for breaking the lease.
• The tenant remains responsible for rent and utilities until a new tenant moves in.
• We take on the burden of marketing, showing the property, and screening new tenants. We prefer to handle this because tenants often don’t find high-quality replacements on their own.

In our market, we usually need a 30-60 day notice prior to move-out to fill the unit. This means the current tenant pays the broken lease fee, and that’s it!

Good luck!

[Stephen DeFalco]

Thanks for all the feedback thus far.

One piece of information that impacts a lot of this - this is a condo in a larger building and the HOA doesn't allow leases under 1 year including MTM so we can't implement that strategy but keeping leases to a year makes sense. The other issue, especially in instances like this, is there's a rental cap/% of building rent at one time so when we loose a tenant we get put on a waiting list to be able to rent again which is on average 3 months of vacancy in-between each lease so it's not loosing a couple weeks of rent.

We'll move forward trying to help her get a sublease and make sure we put a termination clause in our next lease.  

Thanks again

[Mike Dymski]

It would be difficult to make a viable return on investment with that much vacancy at every turnover.

[Stephen DeFalco]

@Mike Dymski correct. Unless the 1-year leaser re-up's their lease (which has been the norm for us at least for a second year) with an annual turnover we wouldn't be making anything significant on the property which is why we prefer 18 month or 2-year leases. We have been fortunate to have a few tenants re-up their 1-year leases multiple times so have only have the dreaded 3-4 month vacancy twice the whole time renting it but it's always a possibility.  

[Brie Schmidt]

@Stephen DeFalco - My compromise is that I will post the rental listing on Zillow and the tenants will show the property.  I usually figure out 3 time blocks per week that the tenant is available and schedule showing during those times.  I do inform them that if I can't find a tenant to move in right after they move out that they will be responsible for lost rent.  I also inform that that under the lease the new tenant is responsible for paying them and they are still responsible for paying me, but if they help out by doing showings I will sign a lease termination and a new lease with the new tenants.  It ends up being 3-5 hours of work for me and everyone wins

[Bryan Montross]

First, I would check your local landlord-tenant laws to make sure you know what you can and cannot do, or better yet, spend the money for a 30 min call to ask a lawyer. Second, a lease is a legal binding contract. If this was a large apartment complex do you think they would just let a tenant move and not pursue collecting the money owed? Probably not. So why should we be any different? However, people's situations change and I do think it best to work with the tenant to come up with a solution that works for everyone. You should do your due diligence to get a new renter as soon as you can. The current tenant should keep paying until a new tenant is in place, but hopefully that is before the current tenant moves out and she is not out anymore money. Next, I would not make it a sub-lease and still have your current tenant in the middle. Instead I would look at creating an amendment to the current lease the changes the responsible party to the new tenant and the new tenant just takes over the current lease. I think that would probably get around your HOA rules because it is still the same lease.

In the end, work with your current tenant to come up with a solution that works for everyone, but don't let them off just because they want to leave. If you truly can't find a new tenant or the HOA is blocking you, your current tenant is still on the hook for as long as the lease is. I would pursue action to get what you are owed. Too many tenants take advantage of Mom and Pop landlords because they are willing just to write it off. So to them a lease doesn't really matter because we have made it so it doesn't matter.

[Alan Asriants]

Some legal action is just not worth pursuing...
If she is moving out at the drop of a hat without any fair warning its not certain where she would take this next. 

Im not familiar with the Landlord-Tenant laws in Chicago area but my guess is that Chicago is more tenant friendly

That being said, maybe you can work something out with here where she is responsible for the next two months or until you find a new tenant. 

How is your market? Is it easy to find renters, if so, try to negotiate something out of her and move on with a better client...

[Mae Galang]

Stick with one-year lease. Charge her a "minor" fee for breaking her lease (whatever amount it states on the contract) and set her free. List the property as soon as you can so hopefully it doesn't stay vacant for long.

I'm slightly bias because I recently moved in to a new place and vacated my old apartment with still about 3 months left on the lease. Told my landlord I moved out but intend to pay my rent until my lease is up. She found new tenants within a week! So now, we do not have to pay for 2 places these next few months. We already budgeted for it but thought that was great of her to be accommodating and proactive. Definitely leaving her an awesome review!

[Jonathan Klemm]

Wow, what a great post with a ton of awesome feedback @Stephen DeFalco!

At the end of the day, you will waste WAY MORE TIME AND MONEY trying to take your tenant to court...especially here in Chicago!

You got some great advice from @Paul De Luca about adding an early termination clause.

Plus I REALLY LOVE @Randall Alan approach of working with the tenant, not against them...at the end of the day, this good karma will come back around.  

[Stephen DeFalco]

Closure! We talked to the tenant and offered to help them market the unit for a sublease and in less than two weeks are securing the paperwork for a one year sub with no gap in rent payments. 

Also, especially in Near North, everyone we've had apply for the place loves that we are upfront/transparent and include parking and storage in our rental price since so many developers and larger buildings near us market the unit at one price and then when they find out it's another $300+/month for parking it's out of their budget. 

@Paul De Luca and/or @Jonathan Klemm - would you be willing to share your Chicago-specific lease agreements or what language you use in your leases for the early termination so we can incorporate that into our future leases?

Thanks so much everyone!

[Jonathan Klemm]

That's a HUGE WIN @Stephen DeFalco!!  Congrats!

I know how stressful it can be with those gaps in monthly income.

I personally use the standard Chicago Association of Realtors lease...do you have a copy of this by chance?  I will need to double-check the language they have in there about early termination, if any...

[Stephen DeFalco]

@Jonathan Klemm - yes we use the Chicago Association of Realtors lease too. It has a lot about evictions but nothing on the other end.