Tenant wants to break lease - what would you do?

Question

I’ve run into a situation with a tenant that wants to break the lease, wanted to throw it out there to see what other folks would do in this situation.

Tenant signed a lease active from 9/1/2019 - 9/1/2020. The wife filled out the application and was approved on her own and is the only one on the lease paperwork. It quickly became apparent that her husband was the point of contact, which is no problem. He’s the one who calls/texts me for any reason, including asking to delay the rent due date a couple times earlier this year. Come August 1st (6 weeks ago), he texts me saying they want to renew the lease for another 12 months (through 9/1/2021), which sounds good to me. I tell him that I will extent the lease on Cozy (my mgmt. site), and that it will send her an email (since her email is the one used for the lease), and that she’ll need to get log in and confirm the changes, which she does.

Then I get an email over the weekend from the wife: Her husband has been living back in their home state for at least 6 months, and everything we have discussed has been forwarded to her via phone screenshots. She claims that she didn’t know he had renewed the lease for another year (even though she had to open the email she was sent from Cozy and approve the change) and was planning to ask me to go month to month, even though that communication should have been made on August 1st (30-days’ notice prior to the end of the existing lease). She says she took a position on the east coast (we’re in Colorado) and would like to vacate the house on 10/31, and asks “what would you need from my company to break the lease”.

So that’s what I want to throw out there – what would you ask/require in this situation? Even though the husband is the one who texted me asking to extend the lease, she approved the extension so I feel it's binding at that point. Assuming that is the case, I'm not going to force them to pay the full remainder of the lease, but I want to find a middle-ground. I know that finding another tenant in Nov/Dec is going to be significantly harder than finding one in August or September which is what I was originally looking at. Add that to the fact that she asked what I need “from her company” to break it. Thoughts?

Erickson Sainval · Answer

Are they worth the headache? A situation like that I would be quick to take the necessary steps to move on.

Anthony Wick · Answer

@Austin Snow

1) Yes, lease is binding.

2) No documents needed from her company.

3) Offer either a lease buyout of 2 months rent, which legally lets them walk away. Or...

4) Attempt to find a new tenant for Nov 1, and release them from their lease.

The last option comes with the understanding that you will only fill it with qualified tenants, and the tenant is responsible for rent until you do find a new tenant.

5) Put everything in writing, to both of the tenants. And require acknowledgement, from both of the tenants.

6) Handle the damage deposit as you always would at move-out.

Alyssa Dyer · Answer

Man, what a bummer. Honestly, I'd probably get paperwork redone with whoever is in the home and do a termination of lease with the other party. If they're good tenants, keep them month-to-month but get a 60 day notice instead of 30 (since you're creeping up on the holidays and a vacancy would suck).

We typically tell tenants we will keep their rent rate if they renew or increase it if they go month-to-month. Not sure if that would work in this situation. Might be an easy sell since you're doing them a favor.

Kyle J. · Answer

@Austin Snow  Some thoughts in no particular order:

Tenants can and do break leases all the time for various reasons.  It's unfortunate, but it happens (as you're finding out).  From what I read in your post, this tenant is not asking you to break the lease, she's telling you she's going to.  (Her husband has already moved and she's already accepted a new job....she's going to move.)  So the only thing left for you to decide is how to respond.

"Forcing them to pay the full remainder of the lease" is not an option.  You just can't legally do that, so you're not really doing them a favor by not doing that.  The law requires that you make a reasonable attempt to re-rent it to mitigate your losses.  So that's what you should do.

Focus on getting it re-rented as quickly as possible.  Let the tenant know that she's responsible for the rent until you get it re-rented.

You don't need anything "from her company".  If she's going to break the lease, a note from her company isn't going to change that or make it better (at least not from your standpoint).

In the future, I would have both the wife AND the husband fill out an application and sign the lease.  Not sure if there was a reason you only had the wife do that, but ideally you should have anyone over the age of 18 fill out an application, be screened, and listed on lease if they're going to be residing in the property.

Lastly, you should also have your leases state that the tenants are "joint and severally liable" so each tenant can be held individually responsible (but this only helps if they're both listed on it).

Good luck and hope this situation works out for you.

Austin Snow · Answer

Thanks, all! Some great insight here. With regard to getting something from her company, the way I read the email sounded like she was asking what I'd need monetarily from her company to break the lease. e.g. it would be part of her relocation package. I know she works high-level management jobs and gets paid in the mid-six figures, so it would make sense that she would tell her company she needs to break the lease, and they'd ask her what that's going to cost as part of the package. In most instances, I'd likely let her know that she's liable for rent until I find a new tenant, but in this instance I simply don't want to leave anything on the table, i.e. you don't get something unless you ask for it. Regardless, I'll probably end up simply asking for coverage of rent until a new tenant is found. Thanks again, all.

Bill S. · Answer

@Austin Snow so some good advise already. My approach is this. Work up an early termination agreement. The agreement would state that they owe something like 2x rent as a termination fee (for me, if the rent is $1,000 per month my termination fee is something like $1,950). Explain that this fee covers re-renting costs and potential lost revenue. Explain that it caps their exposure for lost rent or if you have to rent the property at a lower rate to get it rented at the holidays. After you have the signed termination agreement and the funds required by the agreement, start advertising. Hopefully you can get it rented for a Nov 1 move-in. You will have some work to pull it off but it could end up being a small windfall to you.

As others have said, in the future, all adults over 18 must sign the lease. No exceptions. If you rented to lower end tenants you could have ended up with a house full of felons and sex offenders who coerced someone to apply on their behalf.

Zachary Ray · Answer

Be sure to add an early termination clause into your next lease. Technically they signed the contract so they are on the hook until it expires. Now if you do some kind of agreement to let them out that is on you but moving forward include the clause so you can make this work moving forward.

William Moya · Answer

@Erickson Sainval I'm with you on this one, the quicker you move on the less stress you will have. And in this market you should have any issues rerenting you property.  Good luck

Isaac Pepper · Answer

@Austin Snow a lot of good advice here.....I will add that I think it's best to have a lease that spells out the consequences of an action apon signing. This way everyone is on the same page on how things will play out. It also eliminates questions from the tenants. "I am going to break the lease, what do you need?" "Ok thanks for letting me know, please refer to the lease, #-x section-x."

Bill S. · Answer

@Austin Snow there are a number of suggestions above about "keeping" the security deposit. I would advise against that. I like to have the security deposit in play so that the tenant has incentive to clean the property and continue to pay rent. There are those that say keep the security deposit for the last month's rent or use it to offset the termination fee. No go. Again, you want to incentivize the tenant to end the relationship well and leave the property in good condition. If there is a couple grand at play they may not drag the piano across your wood floors but rather get a professional mover to do it right. All sorts of ways that not having a security deposit hurts you at the end of the lease. Finally you must (Colorado law) send the tenant an accounting for the security deposit even if all of it is used for repairs/expenses. If you fail to send the accounting for the security deposit and the tenant sues you, you would owe 3x the SD and you have no defense (you loose).

Tenant wants to break lease - what would you do?

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