Need help quick. Tenant wants to break lease.

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Need help quick. Tenant wants to break lease.

Stephen N.
Accountant · greenwell springs, LA · Member since 2009 · 177 posts · 43 votes

Ok, so here is the deal. I recently purchased a nice middle class home from an out of state owner who was renting it out to a tenant whose lease runs out at the end of July.

I bought the house sub2 and was planning on using the last half of June and all of July to market the house for a lease purchase. Initially I told the tenants I would renew the lease but I would charge more for rent. They weren’t interested. So I gave the current tenants a 45 day notice (as required by the lease) that their lease would not be renewed. I told the tenants that I would probably start marketing the house to sell it and to expect that I would call upon them from time to time to allow me to show the home. They were fine with that.

Well, I get a phone call today from the tenant saying they found another place to stay and they would be moving out at the end of June. I said that’s fine but they still would owe rent for the month of July.

Well, that’s when the tenant just went ballistic. He started out by saying he thought he was doing me a favor by moving out early because it would allow me to market the house and show the house a lot easier. Then he started trying to put a guilt trip on my by telling me that I “bought the house out from under him†and gave him an “ultimatum†by telling him his lease would only be renewed if he agreed to “pay more rent for the same houseâ€. Then he really started getting personal by saying “I don’t have a lot of money like you do. I can’t go out and buy a bunch of houses and sell them. I really need my deposit back. I’m sure my $1,600 deposit is like $16 to you.†Of course this is all a crock of you know what. I don’t have any money either. This house is MY FIRST DEAL and I basically got it with no money down.

So here are my thoughts and I would appreciate any advice you guys have give me. I know the guy owes me the last month’s rent. In a perfect world I think I should be able to demand the last months rent and allow me to show the house any time I want to a prospective buyer. The lease he originally signed specifically says I have the right to show it whenever I want. However, if I make him pay the last months rent I am concerned that a) he will tear the house up before he leaves or b) he will try to stay in the house for another month and make my life a living hell as I try to show it to prospective buyers and then tear it up at the end of july.

So what would you do?

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Michael Rossi
Real Estate Investor · OH · Member since 2008 · 4k+ posts · 1k+ votes
17y

Stephen,

You're in the wrong business. "Selling" a property on lease-option really means that you're getting into the rental property business. The majority of lease-option "buyers" never buy the property. You'll be doing a lot of dealing with angry tenants when they realize you've charged them an option fee and they realize that they aren't buying the house.

Back to the current situation. I agree with Eddie. I would let them go at the end of June without demanding July rent. If you think you're going to "sell" this property in June or July while the property is occupied by an angry tenant, you're sadly mistaken. I guarantee that he's going to tell every prospective tenant what a terrible landlord and person you are. You are the one forcing him out of his house for your own purposes. It is to your advantage to get him out as quickly as possible so that you can get the place ready to "sell". It would be a waste of money to market the property while this tenant is still in there. So, he's doing you a favor by leaving at the end of June.

Good Luck,

Mike

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  • Jon Holdman
    Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
    17y

    Welcome to landlording.

    Did you get the $1600 security deposit from the seller?

    What does the lease say? My lease says two things relevant to this. One is that you own the rent until the end of the lease. Two is that there is an "improper lease termination fee". If this was my tenant, and he left a month early, he would owe me the termination fee, July rent, and any damages and cleaning. Since the termination fee is equal to the deposit, he's guaranteed to get nothing back.

    What does your lease say?

    If he's going to wreck it, its going to be wrecked.

    Your response to him is that if he wants any of his deposit back, he needs to stay until the end of the lease, pay all the rent, and leave the place spotless when he moves out.

    1Reply
  • Curt DavisBusiness Member
    Flipper/Rehabber · Memphis, TN · Member since 2008 · 5k+ posts · 2k+ votes
    17y

    I would say split the deposit 50/50 but you also need to get into the home to see how much work is needed to get the home into move in rent ready condition. You might need to do some painting or cleaning the carpets. This should come out of the deposit.
    Just my thoughts

    Curt Davis - KAIZEN Realty538 Reviews
    WebsiteView Page
    0Reply
  • Eddie Ziv
    Investor · Mableton, GA · Member since 2009 · 1k+ posts · 465 votes
    17y

    Stephen.
    I've been there myself before, so I can tell you from my own experience. If you planned to continue renting the place, I'd go with Jon's suggestion, but if you want to sell it and you don't won't to get stuck in either huge rehab or in litigation, just let it go. If you received the deposit at closing when you bought the property (As you should have) then just let him go earlier, don't demand another month rent and keep the deposit until the day he leaves to make sure the place is spotless as Jon said. If the place looks the way you expect it, give him back the deposit. If the guy was your renter for a long time and you knew who you're dealing with, that could've been a different story, but right now your main goal is to have your property intact and in good shape after your tenant leaves.

    Good luck

    2Reply
  • Ralph S.
    Real Estate Investor · Sacramento, CA · Member since 2008 · 566 posts · 356 votes
    17y

    Stephan

    Stick to your guns. Make them toe the line on the lease. And, Welcome to the wonderful world of a landlord!

    You yield, you lose. It's not personal, it's business, and you won't be successful if you can't take the heat and enforce your leases.

    It doesn't matter how much money you have or don't have, yada yada yada, blah blah blah. It's about the agreement they made, keeping up their end of the deal and the consequences they face if they don't. Has nothing to do with you, except they want to keep your money.

    Keep it simple. Keep your head. As a favor to them, just ask, are they aware of the consequences of not living up to the lease terms as they agreed to?

    Good luck.

    0Reply
  • Stephen N.
    OP
    Accountant · greenwell springs, LA · Member since 2009 · 177 posts · 43 votes
    17y

    Ralph,

    If I tow the line, what's to prevent them from wrecking the house out of spite and/or making my life miserable as I try to show the house during the month of July to prospective buyers?

    0Reply
  • Eddie Ziv
    Investor · Mableton, GA · Member since 2009 · 1k+ posts · 465 votes
    17y

    Stephen,
    You see? Now you have two opposite opinions and different experiences... go figure... :crazed:

    0Reply
  • Jon Holdman
    Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
    17y

    Do you have all his info? DL number, SSN, etc? What's to prevent him from wrecking the place is that you can file suit against him if he does. If he's still living around there and easy to serve, you can chase him down and make his life miserable.

    Did you get the security deposit from the seller?

    0Reply
  • Stephen N.
    OP
    Accountant · greenwell springs, LA · Member since 2009 · 177 posts · 43 votes
    17y
    Originally posted by Jon Holdman:
    Do you have all his info? DL number, SSN, etc? What's to prevent him from wrecking the place is that you can file suit against him if he does. If he's still living around there and easy to serve, you can chase him down and make his life miserable.

    Did you get the security deposit from the seller?

    Jon,

    I'm getting the security deposit from the management company that the previous landlord was using.

    I guess I'm just not used to dealing with people who start yelling at me and telling me how they are doing me a favor by breaking the lease and then justifying it by telling me how poor they are and how rich I am. I am not rich. I'm just trying to survive. That's why I am even trying to invest in real estate. And i'm doing it with little money down.

    I think the first mistake I made was talking to the tenant and representing myself as the owner. I never should have done that and I never will. From now on I will represent myself as the property manager.

    This really is a tough call for me. Part of me wants to get the jerk out of the property as soon as possible so I can try to sell the house. And part of me wants him to have to pay every penny he owes to me.

    0Reply
  • Jon Holdman
    Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
    17y

    You may want to rethink being a landlord if you don't like unhappy people.

    Your call. You've heard two different sets of opinions. If you start advertising today, you're unlikely to find a tenant buyer starting July 1. But if you let him go, and deduct all the cleaning, painting, etc, from his security deposit, then you can get the place spiffed up.

    If he thinks he's leaving a month early and getting back his entire $1600 he's full of bull. Sounds like he's expecting that, though, so you're going to have harsh words at some time.

    Keep in mind he's legally obligated to pay you the July rent. By leaving and not paying, he's stealing from you. That may be your lowest cost option, but its still stealing.

    2Reply
  • Ralph S.
    Real Estate Investor · Sacramento, CA · Member since 2008 · 566 posts · 356 votes
    17y
    Originally posted by Stephen N.:
    Ralph,

    If I tow the line, what's to prevent them from wrecking the house out of spite and/or making my life miserable as I try to show the house during the month of July to prospective buyers?


    You know they would do this, or are you just afraid they might? Do they think they can buffalo you and already smell (your) blood in the water, or do they think you're a business man simply reminding them of their responsibilities, and consequences of not fulfilling them?

    You seem willing to give them $1,600 out of your own pocket rather than risk even the possibility of them making you miserable.

    Do as you wish. You're there, you know them, and have to live with any consequences. I'm text in a thread. Easy for me, or anyone else, to say. But, I don't think you should let a hot headed tenant take your money like that, and I think most, even the hottest headed will not retaliate if they KNOW they'll face the consequences. More likely they'll cool (just a little) and whine a whole lot. But, I don't know these people you have as tenants.

    Given this point in the discussion, and what you've offered up, this is simply what I would do, and offer this as a course of action for you:
    Write a letter.

    Confirming our phone conversation on such and such a date. Express sadness that they were not agreeable to your offer of extending the lease with an increase. But, this being the case, your confident that this move can be handled to both your satisfaction. Reinforce both your and their obligations as stated in the lease (paying July rent) and remind them of what has to happen in order for them to get their deposit back. To help make the process easier and ensure no surprises, offer to do a pre-move out inspection so they know without a doubt, everything that needs to be cleaned or fixed in order for them to receive their full deposit back. Most states give a landlord X days to return the deposit. Entice them to keep things up, cooperate with showings and with the pre-moveout inspection, you'll agree to get their deposit back in only a day or two after they move. Recognize the showing may be an inconvenience, and may be many, and ask if there are certain hours of the day that would be more convenient for them. Kill 'em with kindness, understanding and cooperation, but hold your ground. Tell them that they will get X hours notice before a showing, per the law, and that you would ask they make sure the house is presentable at that time. You would prefer they not be present, but that is not required. Reinforce your offer to extend the lease with an increase in rent, maybe even suggest they consider the lease/purchase themselves. Thank them, in advance, for their cooperation during what may be a difficult time. Then CC: a lawyer and law firm at the bottom of the letter.

    Whenever I showed a rented unit and asked the tenants to not be present, I would offer them $20 to go have lunch on me.

    It doesn't have to be a conflict. You can lay it out for them, gooey sweet, without giving them the option of going ballistic on you, yet you make every point they need to hear. Putting it in writing, explaining all you're willing to do to help things go smoothly and with concern for them, only strengthens your position. You might even find yourself going from being bullied to the one in charge.

    Do what's right for you. The consequences are yours, not mine. But, I like the letter of the lease. The risk is inherent to being a landlord. If you lease to purchase, what are you going to do when they lose their job and want to get out and get their DP back?

    2Reply
  • Michael Rossi
    Real Estate Investor · OH · Member since 2008 · 4k+ posts · 1k+ votes
    17y

    Stephen,

    You're in the wrong business. "Selling" a property on lease-option really means that you're getting into the rental property business. The majority of lease-option "buyers" never buy the property. You'll be doing a lot of dealing with angry tenants when they realize you've charged them an option fee and they realize that they aren't buying the house.

    Back to the current situation. I agree with Eddie. I would let them go at the end of June without demanding July rent. If you think you're going to "sell" this property in June or July while the property is occupied by an angry tenant, you're sadly mistaken. I guarantee that he's going to tell every prospective tenant what a terrible landlord and person you are. You are the one forcing him out of his house for your own purposes. It is to your advantage to get him out as quickly as possible so that you can get the place ready to "sell". It would be a waste of money to market the property while this tenant is still in there. So, he's doing you a favor by leaving at the end of June.

    Good Luck,

    Mike

    3Reply
  • Stephen N.
    OP
    Accountant · greenwell springs, LA · Member since 2009 · 177 posts · 43 votes
    17y

    you guys have been a big help. I like the diversity of opinion and you've definitely given me some points to consider. thanks.

    0Reply
  • Stephen N.
    OP
    Accountant · greenwell springs, LA · Member since 2009 · 177 posts · 43 votes
    17y
    Originally posted by MikeOH:
    You are the one forcing him out of his house for your own purposes.
    Mike

    I am not forcing him out. his lease is up and he doesn't want to pay the increase in rent that I was going to charge.

    0Reply
  • Josh Green
    Financial Advisor · Tampa Area, FL · Member since 2008 · 956 posts · 214 votes
    17y

    wow, i really wasn't expecting mike's response. i was thinking he was going to say the opposite of what he said. mike, are you going soft ;-)

    my opinion is the same as jons and ralphs. they signed a contract and must stick to it. stick to your guns. trust me, if you went against the lease, they would be all over you. this is business. if you are so concerned over tenants wrecking the place, then maybe you should just buy places and let people live in for free. they would certainly be happy enough to stay and take care of the place...

    looking forward to hearing what you decide!

    0Reply
  • Eddie Ziv
    Investor · Mableton, GA · Member since 2009 · 1k+ posts · 465 votes
    17y

    Stick to your gun, or get a heartburn? What is the goal here? Stick to your principles, or get the house sold fast? This is not about a rouge tenant, its about putting the house in a turnaround. Yes, in any other case, I probably do what Ralph suggested - A Nice and polite, but firm letter with a CC to my lawyer. The tenant already implied that he think that Stephen has "Lots of money" , Therefore, Stephen can use the image of "Lots of money that can buy lots of lawyer who can make the tenant life miserable"

    If keeping the house intact for sale is the upmost goal here, then let it go and try to get the compensation through the sale.

    0Reply
  • Michael Rossi
    Real Estate Investor · OH · Member since 2008 · 4k+ posts · 1k+ votes
    17y

    No, I'm not going soft. However, in this case there is absolutely no benefit to the owner to force the tenant to stay another month. The owner needs to get the property back to be able to get it ready to sell. The owner doesn't have a snowball's chance of "selling" the property with a disgruntled tenant in the house. Any marketing done during the time the tenant is in the house will be a waste of money. Therefore, with no advantage to the owner, I wouldn't enforce the lease. My momma used to say: don't cut off your nose to spite your face.

    Also, look at it from the tenant's standpoint. This isn't a deadbeat tenant. They entered into a rental agreement with the previous landlord. Apparently, this tenant met his obligation to the landlord and was planning to stay. Suddenly, someone new buys the house and wants to significantly raise the rent. The landlord gives the tenant notice that his lease is not being renewed because the house is being sold. I can understand why the tenant is upset.

    Having said that, the tenant's feelings have absolutely nothing to do with this situation. If it was to the owner's benefit to strictly enforce the lease, I would be 100% in favor of doing so. However, that is not the case and therefore I would let the tenant leave; get the property ready to "sell"; and get on with it.

    Mike

    2Reply
  • Ralph S.
    Real Estate Investor · Sacramento, CA · Member since 2008 · 566 posts · 356 votes
    17y

    Stephen's plan is Lease Purchase. He hasn't shared details, but, he's probably looking at some number of years before the purchase will close. So, it's ending one lease, starting another, and it won't be a quick sale.

    I think it's less about a rogue tenant, and more about Stephen and his conduct, and I wouldn't be so quick to write him off. I too, knuckled under in the beginning. He's already gotten off the couch and accomplished his first Sub2, which puts him ahead of many. Now he needs to execute the second phase, and has experienced his first challenging tenant. If he is to continue doing this, he must be able to stand his ground when the need arises. It's just a shame that his first tenant turns out like this. I hope he overcomes his fear, learns from the input here and in the end, can call this his first of many successes. But, Stephen, it is your money, house and your stomach on the line. Hope you'll let us know how it goes.

    And Mike, who are you and what have you done with the real Mike?

    0Reply
  • Josh Green
    Financial Advisor · Tampa Area, FL · Member since 2008 · 956 posts · 214 votes
    17y

    if i recall correctly, you mentioned that you 'recently' purchased the property and that the 'management company' had the deposit.

    are you still using the mgmt company? i am assuming so since they still have your money. why are you the one dealing with the tenant? why is the mgmt company not handling all of this for you?

    0Reply
  • Ralph S.
    Real Estate Investor · Sacramento, CA · Member since 2008 · 566 posts · 356 votes
    17y

    Having read Mike's latest reply, I do understand what he's saying. All the more reason to come across as understanding and accommodating. It really comes down to collecting the rent without incurring damage. As far as the showings and the current tenant are concerned, that $20 to get them away is cheap, and I always attended showings to prevent such bad mouthing. Exchanging the deposit for July rent is not something I would normally consider unless they were out and left the place rent ready, but, would be an option to consider.

    0Reply
  • Stephen N.
    OP
    Accountant · greenwell springs, LA · Member since 2009 · 177 posts · 43 votes
    17y

    I was going to email this and copy my attorney. What do you think?

    [owners name],

    As a follow up to our phone conversation earlier today I wanted to send this email to confirm my understanding that is your desire to a) surrender the property you are currently leasing from [name of company] as of 6/30/09 b) withhold the last month’s rent and c) have 100% of your deposit returned. If I have misrepresented anything you said please correct me.

    According to the terms of the current lease contract a tenant in good standing may terminate the lease early but is required to pay 180% of one month’s rent at the time the notice is provided. In addition to paying 180% of one month’s rent, the provision also says the notice must be a minimum of 45 days. This provision is found in Section 25b of the contract. Obviously the purpose of this is to allow the landlord to have time to get the property either sold or rented out to another tenant. It takes time to find tenants or buyers and having a vacant property can be very costly. The purpose of mentioning this is simply to point out how important it is for a tenant to fulfill his obligations under the contract.

    In our conversation today you said you thought you were “doing me a favor†by breaking the lease a month early. While it may seem to you that it is advantageous to [name of company] for you to break the lease, the opposite is true. One of the reasons [name of company] purchased the property was because of the terms of the lease agreement. It was known that the lease was about to run out at the end of July and if you decided not to renew then there would be 6 weeks or so to market the property while a tenant was still renting the property. Section 21 of the contract lays out the tenant’s obligation to allow access to show the property basically at the will of the landlord as long as a reasonable amount of notice is given. In fact, the contract states that the tenant does not even need to be home in order to show the house to a prospective buyer. Breaking the lease a month early is not a favor. It means the time to market the home until it becomes vacant will be reduced by a month. And breaking the lease a month early with no penalty is simply unheard of, especially when you only give 8 days notice.

    With the recent change in ownership it was [name of company]'s intention to be as upfront and honest about changes that would affect you and your family. As you will recall, I called you even before the property had been purchased and let you know of the company’s intention to either sign a new lease with you or sell the property when your lease was up. You made it clear, at least initially, that you had no desire to sign a new lease with the increase in rent that was proposed. So, per the lease agreement a 45 day written notice of termination was given to you in mid June with instructions on where to send the last month’s rent payment. I think you would agree that it was made perfectly clear to you what our intentions were with the property and what your contractual obligations were as well. At no time did you ever express any interest in breaking the lease a month early.

    I know moving is no fun. Trust me, I’ve done it many times. That’s why I said I wanted to be as accommodating as I could be to make the transition to a new place as smooth as possible. However, breaking the lease and not paying the last month’s rent was not something I ever agreed to do or even insinuated that I was open to.

    I believe that [name of company] has treated you guys fairly and we’ve held up our end of the contract thus far. I also think we have every right to expect that you guys will hold up your end. After having the chance to talk to you on the phone I get the impression you are an honest and reasonable man. I hope you can understand why it would be unreasonable to expect a landlord to allow you to break the lease a month early with no penalty whatsoever and with only 8 days notice. I don’t think there is a landlord in Baton Rouge that would agree to that.

    Having said all of that, if you guys are intent on moving out at the end of this month I am prepared to make an offer to you.

    I will refund half of the deposit less any damages to the property (not to exceed half the deposit) if the following conditions are met:

    1. You must move out of the house in accordance with the terms of Section 19 of the contract. That includes having the carpet professionally cleaned as per Section 19a. If the damages to the property exceed half the amount of the deposit then you will be required to come up with the difference out of your pocket. However, I don’t anticipate any damages whatsoever so this shouldn’t be an issue.

    and

    2. Prior to moving out you must allow me or anyone representing [name of company] to show the property anytime I desire between the hours of 9:00 am and 7:30 pm regardless of who is at the house. That means if no one is home we still get access as per Section 21b of the contract. The only requirement is that I provide at least 12 hours notice either via email or by calling your cell phone.

    [owners name], I believe this is an extremely fair offer. If you accept this offer please “reply all†and say “I accept the offer as presentedâ€. Thanks in advance.



    0Reply
  • Tom NA
    Real Estate Investor · Mountain View, CA · Member since 2008 · 234 posts · 32 votes
    17y

    Stephen,

    In my opinion, the letter is way too long. I didn't even finish it as I kind of lost interest after awhile. Be *clear and concise* and stick to the facts and any proposed remedy. Including items such as his comment of "doing you a favor" will just tend to stir the pot.

    I just finished a letter to a tenant that left early (didn't even tell me he was leaving) and my letter to him was clear but unemotional. I told him what terms were violated, how much he owes me, and how long he has to remedy the situation before I file suit. The decision of how it will play out is now his but I didn't include anything about his behavior, my desire for the property, etc. as it really isn't important.

    And, indeed, if you are going to be in this game, get used to uncomfortable interactions and chasing people for money (or letting them take your money if you choose).

    Good luck.

    2Reply
  • Michael Rossi
    Real Estate Investor · OH · Member since 2008 · 4k+ posts · 1k+ votes
    17y

    I agree with Tom - that letter is WAY TOO LONG and full of useless drivel. You don't have to explain yourself. The lease should be self-explanatory. Furthermore, getting your lawyer involved at this point for this matter is just throwing money away. You can't pay a lawyer every time you have a disagreement with your tenant.

    I would call the tenant and tell them you agree to let them leave by the end of the month and see if that is still their intention (tenants only have an attention span of 5 minutes). If so, I would tell them that you'll give them back whatever portion of their security deposit is appropriate per the lease. You won't know what the condition of the house is until they are COMPLETELY out and you've had time to inspect it. I'm sure that you'll find damage of more than half of their deposit if you do a careful inspection of the property and if you charge as much as a professional would charge to make the repairs. By doing it this way, you should get your property back in good shape and you'll still get part or all of their deposit. If you promise to give back half of the deposit, you may just escalate the situation (because they'll feel that you're stealing half of their deposit) and they may not leave and they may damage your property.

    If you feel more comfortable having something in writing, then after coming to agreement with the tenant on the phone - then go get it in writing. I would have them SIGN an agreement in person if I was going to do that (I wouldn't).

    There is a CLEAR distinction between this situation and what I do with a deadbeat tenant. The key point here is that this is a good tenant who has done nothing wrong. He IS doing the owner a favor by moving early. It WILL save the owner money if the tenant moves at the end of June. I'm all for strictly enforcing the lease, however I'm always for doing what's right and I'm also for making the maximum amount of money (which is best served by letting the tenant move ASAP!)

    Mike

    0Reply
  • Stephen N.
    OP
    Accountant · greenwell springs, LA · Member since 2009 · 177 posts · 43 votes
    17y

    Mike,

    Thanks for your candor, but I do not understand how you can say the tenant is doing me a favor by breaking the lease and not paying his last month's rent. I just don't get that. Please explain how this saves me money.

    0Reply
  • Michael Rossi
    Real Estate Investor · OH · Member since 2008 · 4k+ posts · 1k+ votes
    17y

    If you weren't going to make more money with the current tenant out (and a new tenant in), then you certainly wouldn't have given the tenant notice. Therefore, since it's obvious that you'll be making more money with this tenant out, the sooner he leaves, the more money you'll make. You are not likely to be able to "sell" (rent) this to a lease-option buyer with a disgruntled tenant in the property, so having the current tenant stay an additional month is costing you money even if he pays July rent. Furthermore, if you force him to stay an additional month, he may not pay July rent anyway, forcing you to evict him. He may also damage your property because he's angry. It's a major win for you if he leaves at the end of June and an almost certain loss if you force him to stay.

    I would let him go and give him back any portion of the security deposit that you don't use repairing damage he caused.

    Mike

    1Reply
  • Eddie Ziv
    Investor · Mableton, GA · Member since 2009 · 1k+ posts · 465 votes
    17y

    Hey, you can always CC to James A Balonni at Abalonni & Bull LLC attorney-at-law. He wouldn't know they don't exist... :wink:

    0Reply
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