Tenant Breaking The Lease

[Joseph Ortiz]

Hello! I have three tenants renting ONE of my properties. One of them wants to break the lease and leave earlier. Should I keep his security deposit and should I keep him responsible for the rent until the other two tenants find him a replacement? Should I request another security deposit from the new tenant that they will find or just the new tenant will take over the lease? Also, should I prepare new lease for all of them (like the first lease was) or just a separate lease for the new tenant? Thanks for you help!

[Nathan Gesner]

@Joseph Ortiz we need more information. Are they all on one lease and they moved in together? Or is this a "rent by the room" situation?

Here's my policy.

1. When renting to roommates (two friends, five co-workers, or a husband/wife) they are all considered one entity. They all sign the lease. They are all 100% responsible for the terms and conditions. If three friends rent a place and only two of them pay their share of the rent, they can all three be terminated and kicked out. If two of them abandon the property, the remaining tenant can't pay just his portion and expect to stay. This is called "joint and several liability" where every individual is 100% responsible for the terms.

2. When a tenant wants to leave, I require them to fill out a "Remove Tenant Addendum" and pay me $50 for the trouble. It states the departing tenant is no longer liable for the terms and that he has no rights to the property. It also states the deposit stays in place; if the tenant paid a portion of the deposit and wants it back, he has to get it from the remaining tenants. The addendum also tells the remaining tenants that they are releasing the departing tenant from any responsibilities so they can't claim three months later that he's responsible for a hole in the wall. By the way, I have a similar process for adding tenants.

3. You don't need a new lease any time you add/remove a tenant. A written addendum, signed by all involved, is sufficient.

This is why I hate roommate situations. Three or more unrelated individuals try to pool their money together to rent something they normally couldn't afford. They inevitably have a disagreement or one of them gets a girlfriend or a job transfer and they want to leave. The remaining tenants can't afford the rent (or don't want to) so they scramble to find some other willing sucker to pay a portion and move in. they usually lower their standards just to get someone to pay the money. Landlords usually play along because they think it's better to have three paying tenants than two disgruntled tenants that may disappear into the night when things get too expensive. It's more work, more risk, more trouble.

When I rent to three or more unrelated (not blood relatives, not married) then I hold them to a higher standard. Instead of letting them combine their income to achieve 3x rent, I require each individual to make 2x the rent for a combined total of 6x the rent. Three friends renting a $1,000 house would each have to earn $2,000 a month or more. This eliminates about 90% of friend rentals and those that do rent together rarely have issues.

If you don't have higher standards,  you'll see something I ran into a few years back. Five people wanted to rent a 5bed/3bath house with 3,000sq.ft. for $1,500 a month. Their combined income was $4,800 so it met my requirement of 3x the rent. Sounds reasonable, right? However, one individual made $3,000 a month. Two of them made $900 a month. Two of them didn't work or have any income source. If the guy making $3,000 a month left or lost his job or got tired of the free-loaders, the entire thing would fall apart.