"Early termination of lease without penalty"

"Early termination of lease without penalty"

Orlando, FL · Member since 2009 · 2k+ posts · 282 votes

My lease, which I bought from a lawyer about a year ago, has a clause "early termination without penalty" where the tenant must give 60 days notice and pay an extra two months rent fee in order to move out early (Two months rent would be $1800 in my case..). It does not say in the lease what happens if the tenant disregards that 2 months fee and moves out anyway. They passed a law here a year or two ago in my state that allows landlords to pursue tenants for the entire lease terms rent, so I suppose that would be the alternative.

Maybe I'm wrong, but 2 months rent sounds a bit extreme to me. I would think many of them would say "screw it", and move out anyway, and then I'd be stuck trying to collect it from them. I was thinking of changing the fee to something more reasonable, like a $500 fee + 60 days notice to break the lease, in which I think I'd be more likely to be paid the fee.

What do people think, should I just leave the clause as is, or change it? My main goal is to dissuade people from breaking the lease very early on--if they wanted to do it when there are only two or three months left until the end of the lease it wouldn't bother me as much.

Also, how does one collect on something like this, do you actually have to file a lawsuit against them? Is it ever worth the time and money to pursue people legally for something like this?

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Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
16y

If your tenant decides to bail none if thus matters. They will just disappear.

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  • Real Estate Investor · North Carolina · Member since 2008 · 1k+ posts · 483 votes
    16y

    Apart from the military termination clause, I don't allow early termination of the lease. Why should I?

    Tenants with good credit won't want to screw it up or, worse, have me come after their assets at a later date to satisfy a judgement.

    Tenants with bad credit only get a MTM lease from me so early termination for them is seven days.

    Why give anyone a termination option in writing? You can, if you want, always negotiate it case by case.

  • Real Estate Lender · Philadelphia, PA · Member since 2009 · 216 posts · 112 votes
    16y

    I was once a tenant in an upscale apartment complex that had this clause. My monthly rent was $2000. I had just graduated college and moved to this place with my girlfriend at the time. We both signed the lease, and two weeks into it she left me high and dry. I had to give my 60 days notice (still paying $2000/month during those two months) and then cough up an additional $4000 to break the lease. It sucked, but I didn't want to hurt my credit so I paid it.

  • Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
    16y

    If your tenant decides to bail none if thus matters. They will just disappear.

  • Real Estate Investor · Lake Worth, FL · Member since 2009 · 263 posts · 92 votes
    16y

    Again, A lease is a legal binding agreement between two parties. You do NOT have to sign the lease if you don't want to so when you agree to the terms and they are legal than you owe the money.

    On another note if you don't have the early termination notice but you terminate early and give 30 days notice and the unit is in the same condition as when you moved in then you only pay from the date you move out until the landlord re-rents the unit or till the end of the lease which ever comes first.

  • Real Estate Investor · North Carolina · Member since 2008 · 1k+ posts · 483 votes
    16y

    Correct, Jeff B. But with college rentals around here dependent upon the college year (usually August through July), one can realistically have vacancies that cannot be rented out again until August 1st.

    Case in point, couple years ago a father made his son move out of a party house in October and continued paying me rent through July despite For Rent signs and ads.

  • Real Estate Investor · the villages, FL · Member since 2008 · 5k+ posts · 3k+ votes
    16y

    Jeff B- Just because you have a legal agreement signed, doesn't mean you'll ever see a dime if the tenant bolts, just as Jon said. Rich

  • Rental Property Investor · Baltimore, MD · Member since 2009 · 624 posts · 559 votes
    16y

    Bienes,

    Your comment regarding "but 2 months rent sounds a bit extreme to me"... is missing this point...

    If you give tenants any opportunity to easily break a lease they will... and you are the one who will end up paying for it in terms of vacancies and high turnover expenses.

    Protect yourself at all costs and don't go soft on tenants... this is your business, you count on that "booked" income stream to run your business, don't let someone off the hook easily.

    Best of luck!

  • Real Estate Investor · OH · Member since 2008 · 194 posts · 89 votes
    16y

    I am with Peter and NC Mark as I don’t have provisions allowing early termination either. I want them to understand the seriousness of them signing on the dotted line. They are making a commitment I expect them to follow to the letter, as I will. Having said that, I am not a monster. If I can reoccupy the unit then I would let them out of it but even giving them that option is up to my good graces and not a wiggle clause for them to use. They need to know that I am doing them a favor. But in the mean time they will be paying if they decide to move. Set the right expectations up front and you will have fewer problems if they realize that playing games isn’t going to work. If they try in the end, it is going to cost them and the clientele I deal with understand this (i.e. not the low end).

    Whether they bolt and I can’t collect is another issue altogether to me. But I am not giving them any provisions to gracefully exit. When mortgage companies allow me to stop paying penalty free if I had a vacancy or a problem, MAYBE I will allow the tenant the same consideration. But we all know how long until that happens.

    Good Investing

    Mike C

  • Real Estate Investor · ten mile, TN · Member since 2009 · 1k+ posts · 374 votes
    16y

    Mike C. I like your statement. "When mortgage companies allow me to stop paying penalty free if I had a vacancy or a problem, MAYBE I will allow the tenant the same consideration."

    Just try giving back your home (even in great condition) to the bank and only having to pay a two months mortgage payment after the 60 day notice.

    Yep it is a contract!!!

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