Breaking Lease- Mititgating this loss

[Sarah Lewis]

I need quite of bit of help as this is the first time I'm dealing with a tenant breaking a lease, and I have a number of questions. (I'm a small time investor with only a couple of properties.) Tenant had been living there for over three years before signing a new one year lease and now want to break out after only a few months into this new lease.

My lease agreement basically stated that if tenants leave early, they would be held "liable for the balance  of the rent"  minus any rent I collected or could have collected from a replacement tenant by reasonably attempting to re-rent. Essentially, its the principle that the landlord should make a reasonable attempt to re-rent the place in order to mitigate the tenant's losses.

I know this won't end well and I'll probably end up at California Small Claims Court so I want to have all my bases covered and dot all my i's.

1) When should I start showing the place?

I'm concerned that even if the tenant says they'll move out nine months early and I find a replacement, what happens if the tenant doesn't move out so early? After all, the current tenant has already broken one written agreement so who's to say they won't also break that new date too?

To avoid that situation, should I market and show the place only after the tenant left? Or, will that violate the reasonable attempt principle?

2) Tenant has already started to show the place. How do I respond?

I just got an email today that they want to leave early and they said they had already shown it a few people already. (It turns out they put it up on Craigslist last week before informing me today they want to leave early and the only reason I checked Craigslist was because I wondered how they found somebody already). Basically, they said they found somebody who were 'very excellent candidates' and 'personable' who I would need to meet first. But, I don't even need to meet these candidates to know there's a bunch of red flags around them.

3) Do I need to accept the first non-bankrupt, non-felon applicant?

My attitude has always been I'd rather keep a place empty and wait for the best applicant. When I rented out to this current tenant, I had rejected four other applications who wanted the place even if it meant I could have rented it out earlier. (Two of those applications had obvious red flags, but the other two probably would have been accepted by some other landlords.) For the tenants who've lived there in the past 7 years, their credit scores were 700+ and incomes were more like 4X the rent. 

But, if I hold to those same standards and expect a replacement tenant with similar qualifications, can the tenant accuse me of not making a reasonable attempt to re-rent? When the first tenant that has a 600 credit score with no obvious red flags applies like felony or bankruptcy applies, can the tenant say that if I don't rent to that person then I didn't make a good faith attempt at re-renting the place?

4) What happens if I ask for higher rent from new tenant? Unreasonable attempt to rent?

When this current lease ended, I was expecting to significantly increase the rental price. For various reasons, their current rent is too low. (There's nothing wrong with the place.) Indeed, the tenants advertised the place on Craigslist for hundreds more than they are currently paying.

If I advertise it a higher price, can the tenant argue that I didn't make a reasonable attempt to re-rent the place because I made it more difficult by narrowing the pool of possible candidates at that price?

But, if I sign a new one year lease with new tenant at current price, then I lock myself into rents that are too low.

5) If I get higher rent, does tenant still have to pay for lost rent?

Is there a sneaky reason why the tenant is advertising it for hundreds more each month?

Let's say the current tenant's rent is $2000 a month, and new tenant's rent $2300. And, the place is empty for a month so that tenant would owe me $2000. But, if I rent it at $2300 for the next 7 months, will the tenant not have to pay that $2000 anymore because I made extra $300 for those 7 months to produce $2100 which would cover that $2000 loss?

But, what if I did a special where the new tenant got a discount for the months left in current lease where they paid current rent and then had to pay market rate for the rest of that one year lease?

6) For lost rent, do you take it from Security Deposit?

The security deposit is fairly large, but its still short by hundreds of dollars of the monthly rent.

7) What's upper limit for lost rent from Small Claims Court?

How many months would the court give me for lost rent?

This is probably the worst time to break the lease and find a tenant. If he broke the lease earlier or waited till next year, this wouldn't be such an issue. 

But, if I don't find somebody right away, then I can easily foresee it being empty for the rest of the year with dreaded November and December looming. One year, I had it for rent in November and didn't find anybody till January. 

And, even if I find somebody right now and avoid that scenario, a one year lease will hit end around Nov/Decemeber timeline the next time around. 

When I got the email today, I scheduled an appointment with the tenant this week to discuss this issue and wanted to avoid Nov/Dec by warning/scaring him that the place could easily be empty for those two months if he left now. 

But, since he's already placed an ad in CL, its probably too late for that conversation.

Sorry this was so long but this was my first lease break, and I had a lot of questions.

Thank you for your help.