Tenant breaking 5 yr lease, barely a yr in

[James Hsia]

We were thrilled to find a tenant in California who was willing to sign a long term lease due to a project he was working on. The caveat was the rent was set at below market and fixed for the 5 yrs (rookie mistake). The tenant just informed me he is planning to quit his job and will be breaking the lease. At this point what are my rights as a landlord? Do I have the right to keep his entire security deposit? Any suggestions or tips will be much appreciated!

[Jon Holdman]

Its easy to think that a lease gives you some assurance you'll have a tenant for a while.  It does not.  A lease is much more binding on the landlord than the tenant.  If a tenant want's to leave, they will.  As you have now found.  You've essentially given someone a below-market lease thinking they were bound, only to find its not really very binding.

My lease includes a "improper lease termination fee" that kicks in if the tenant does not give notice as required by the lease.  In your case, this would apply.  I set it equal to the security deposit.  That said, I only do month to month leases.  So, look at your lease and see what it says.  And speak with your landlord/tenant attorney.  State laws may allow some fee, even if the lease doesn't specify one.  But may not.  Your lease may have an acceleration clause that makes them responsible for the entire lease even if they leave early.  Even if so, you're almost never allowed to collect double rent.  So, once you get a new tenant you can't collect anything from the old tenant.  I'd try telling the tenant you'll try to get a new tenant ASAP but they have to pay rent until then.

By the way, if the property is mortgaged, have a look at the promissory note.  The due on sale clause often states exceptions that don't violate this clause.  A common exception is leases for three years or less.  So a five year lease often does violate the due on sale clause.