Penalty for getting out of a lease

[Wayne Connell]

I own three rental properties, all duplexes. One is a short term rental but the other two have a year lease option or month to month option with different price points. I have read on Biggerpockets articles, about agreeing to let someone out of a year lease early, if they agree to pay a penalty. It was suggested that this penalty be equal to two months rent. My question is, should this be detailed in the rental agreement or just "standard operating procedure" if or when it happens? Also, I thought about if it was within the first three months of the lease to charge a three month penalty? Any thoughts or comments for or against would be appreciated. Thanks!

[Marcia Maynard]

Whenever a fixed-term lease is used instead of a month-to-month rental agreement, be sure to include a "Lease Break" clause.  It should fairly compensate you, yet not be too onerous for the tenant.  Tenants will move when they need to move (or want to move) whether they've signed a fixed-term lease or MTM contract. Best to spell out the consequences of breaking a lease, in writing, from the get-go.