Why I let Tenants Break the Lease

[Max T.]

My leases are annual and renew for the full term.

I explain this up front to new tenants. They are responsible for paying rent through the full term of the contract.

Nevertheless, I still get an email now and then from tenants giving notice of lease termination while they are still mid-term. Sometimes they think their lease has renewed as MTM. Sometimes they just don't read/remember our meeting at lease signing.

In the past I have held tenants responsible for continuing to pay rent until a new tenant is placed. Sometimes this takes +1 month but usually not that long. 

I'm currently dealing with a tenant who is under contract to purchase a home. They are past inspections and appraisals. I just found out! What's worse is that the tenant tells me they will be unable to pay their mortgage and my rent at the same time.... So what am I doing?

I'm allowing them to apply their pre-paid last month rent to the month of November. I'm requiring them to be fully moved out by 11/15 (closing is supposed to be 11/5). And I will return their security deposit after I assess for any damages after they are out. Basically I am charging them 2 weeks rent in return for allowing them to break lease early.

I've also contacted their real estate agent and mortgage lender to confirm that they are on track to close 11/5.

Why? A few reasons.

1. These have been good tenants for 4 years. They barely met income requirements when I screened them but never paid late. It actually makes me happy to know that they are in a position to purchase. It will be a good move for their family. I just wish they had told me and used me as their agent!

2. I am very confident in my ability to have a new qualified tenant for 12/1. I have a high quality lead from a family friend. And after I posted the ad I've been flooded by emails for it.

3. I couldn't stop them if I tried. So rather than being angry or bitter I'm choosing to be accommodating. I hope they remember that about me. And due to reason #2, I'm comfortable with the risk I'm taking on.

If the market were different I might handle this differently. But I slept on it and feel that this is the right way to go.

[JD Martin]

We have two options for a tenant in which they can break a lease early. First is they move out as soon as possible, and maintain all costs while we attempt to re-rent. The second is they move out by the end of their paid month and pay a termination fee equivalent to two month's rent, which if there are no damages amounts to one additional month plus the deposit (which has already been paid). Essentially all they need to come up with is one month's rent, which is typically the upcoming month anyway, and they walk away clean - no lawn care, no utilities, nothing - and we assume the risk if the property takes longer than 1+ month to rent. We give them the choice, and I have never had a tenant pick option #1. #2 is clean and easy and costs are known. If it takes us 3 months to re-rent, we lose. If it takes us 2 weeks, we win (a little - turnover always costs money). In any case, everyone is happy and we get the property back in good shape.