Early Termination of Lease

Carley M. · 2016-11-10T05:28:37-08:00

I recently purchased a 4-unit property (like a week ago). While I was moving in, one of the tenants gave me notice that she would be moving out in 45 days. I reviewed her lease and it has significant penalties for early termination: 1) The remaining rent due and payable (offset by re-renting of course - pretty standard), 2) A fee of 1 month rent to compensate me for my time/efforts to re-rent the unit, 3) Tenant is responsible for all expenses to re-rent including repairs, painting, advertising, legal fees, etc.The tenant has made it clear that she has no intention of paying the penalties and wants me to just treat this as if her lease normally terminated. She has 8 months remaining on her lease. She stated her reason for moving out is because I'm having another tenant's bathroom gutted and she feels that the noise from the construction will make her unit uninhabitable for her because she's a grad student and studies at home.I know I can legally pursue the full amount of the lease and penalties. Collecting it is another story. I'm not sure that it's worth the aggravation. On the other hand, she has put me in a bad position where I not only have to juggle moving and the upcoming holidays, but now I also have to interview applicants and show the apartment.There has to be some middle ground between total aggravation (housing court) and doormat (waiving the penalties) but I'm not seeing it. Any advice for a brand new landlord?

Michael Seeker

Investor · Louisville, KY · Member since 2011 · 1k+ posts · 1k+ votes

9y

@Carley M. - welcome to landlording! There are a few different approaches you can take here. The last thing you want to do is alienate a tenant, especially if they are living right next door to you. At the end of the day if she absolutely doesn't want to live there anymore, you should figure out why and then find a way to let her out of the lease on agreeable terms. Here are some suggestions:

1. Find out her study schedule and agree not to do construction on the bathroom during those hours.

2. Outline the early termination clause to her and let her know that she signed the lease through July and she has a legal responsibility. If she doesn't want to fulfill that responsibility for any reason that she should either make a reasonable offer for termination or be prepared to go to court, have a judgment against her and have her credit score severely impacted.

You said "I'm not sure it's worth the aggravation". Well, there are a lot of things you'll have to do as a landlord that are aggravating. If you don't step up and deal with them, you'll get taken advantage of. A lot.

If this were my first property, I would have let this person out of the lease and just tried to find a new tenant. But today with several years of experience under my belt (and countless aggravations) I would give them some options that I feel comfortable with and if they don't want to work with me then I'd be prepared to take them to court.

On a related note: I got a check for ~$1200 about 6 months ago from a 3 year old settlement against a contractor. I never thought I'd see a dime of the $4K he stole from me, but wanted to make sure he had to carry that judgment on his credit if he chose to be dishonest and shirk his responsibility. It wasn't pleasant taking him to court, but I would be very disappointed in myself today had I not done it.

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Kaz M.

Member since 2016 · 161 posts · 31 votes

9y

I am interested to following this and see what you decide to do Carley. I would like to know on what terms will the tenant be willing to stay ie schedule or duration of the construction. Good luck!

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Carley M.

OP

Investor · Buffalo, NY · Member since 2016 · 100 posts · 71 votes

9y

Originally posted by :

... You said "I'm not sure it's worth the aggravation". Well, there are a lot of things you'll have to do as a landlord that are aggravating. If you don't step up and deal with them, you'll get taken advantage of. A lot.

I think under normal circumstances, I wouldn't hesitate to follow this through, including Housing Court. However, with unpacking, the upcoming holidays, and the added stress of doing my first round of tenant selection, I think taking her to court right now isn't worth the added stress to me. The purchase of the property was incredibly stressful and with nightmare sellers (5 closing dates between July and November). I haven't even had a chance to breathe and now I have to decide if getting a judgment for the money is worth the negative energy and the stress. I don't think it is.

I am certain I can re-rent the unit without much delay, so the lease balance/re-rent offset is probably moot and I'm willing to forego it. I'm comfortable waiving the re-renting expenses and repairs if she agrees to patch/paint the apartment (it's in really good condition so this is probably unnecessary), and I'm willing to meet her halfway on the re-renting fee (half a month rent instead of 1 month, which the lease says I can take out of any security deposit due back to her) - but I won't offer to use the security deposit to pay it. I don't want to tell her I'm taking it from the deposit, because then she has no incentive to try to get her security deposit back.

If she's not agreeable to those terms, then I will move forward with full enforcement of the lease and any negative credit reporting that is applicable. I think that's the fairest way to handle this particular situation at this particular time.

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Ben W.

Investor · Cincinnati, OH · Member since 2014 · 97 posts · 27 votes

9y

@Carley M., Being reasonable and willing to compromise/see the issue in the eyes of the other side is an important aspect to running any business. As suggested, try to determine if this is a simple Yes or No when asked "will she stay". There may be other factors than your project in the building - she found a nicer place, less expensive, closer to job/school, ran out of money, etc... This is a business - treat it like one and it will pay like one. Treat it like a hobby and it will pay like a hobby. Stick to your guns. Tenants need to be "trained" as well.

Here is my only caveat: the courts in some jurisdictions will not let you get double compensation - you may need to show that you are harmed. By that I mean, you would have to show that you suffered a loss by her moving out and you may only be able to receive comp for the time period in which the unit is NOT rented. So, maybe negotiate a settlement fee? Make sure to communicate everything in writing.

So in summary, here is what I would do:

1. Advise tenant in writing of receipt of notice but outlining her continued obligations under the lease, Ask her to call you to discuss specifics.

2. If she calls, do the fact finding/digging.

3. if still a Heck No, then advise her that she still has the ongoing obligation.

4. if she turns in the keys, advise her in writing of her continued obligations. If she does not turn in keys and/or does not pay rent (did you receive a deposit on the purchase - if so, do not give any credit to rent yet), send her a late notice and treat her as a continued tenant.

5. If you have keys, get the place turned and rented.

6. At end of the time of determination of your TOTAL loss (include deposit as a payment then), send her a letter and process as if going to small claims. She is educated and has upside - good for you.

I do not know how large your holdings are, but you have to have a process. As @Michael Seeker stated, windfalls from collections are a good thing.

Best wishes.

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Amanda Palmer

Cincinnati, OH · Member since 2016 · 25 posts · 7 votes

9y

Dealing with this right now! We manage our own properties as well. A tenant who has 7 months left on her lease just decided to buy a house. She did not inform us she was even looking or wanted to move, but wants us to kindly break the lease. We responded by telling her she needs to honor the legal contract, find a sub-letter and allow us to approve that person. She replied with a short list of complaints about the unit. We followed up with the fact that she never brought these to our attention, and they were so minor that it would never hold up in small claims anyway. But because we manage the place, I really don't want to deal with her and her attitude for another 7 months. The market is not ideal right now for signing new tenants -- we can definitely have someone sign on for more monthly rent in the spring and summer, when the area is in high demand. So I realized I have two options: 1) sign someone to a 6-month lease, offer to renew for 12 months (increase rent) or find a new tenant at that point or 2) reset that unit for a 12-month lease in January. Gross.

We have decided to let the lease go, look for another 12-month signer. The move-out date for the current tenant is Dec. 9, we want to fill it by Dec. 15. Current tenant to pay all of December, reimbursed for half if we can find someone to fill it by Dec. 15. If not, she will forgo the return of her deposit and we will use it for January's rent.

If I were you, let her go. Keep her deposit (breaking any of the lease terms can cost her the deposit, but I'm starting to think she never paid one to you since she was already there. Charge her another month instead.) Start fresh. Congratulations on your new investment property!

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Account Closed

Real Estate Agent · Las Vegas, NV · Member since 2015 · 2k+ posts · 1k+ votes

9y

At this point the tenant has not anything illegal You have a 45 day notice immediately try to find a tenant and ask your lessee to assist in the showing .If you find a new lessee great and when the tenant vacates you will be better able to access your damages.Until the rent is not paid or lease violations have not occurred it would be best to have as much cooperation as possible . This should make for an easy transition and you are not giving up any of the rights in your lease.

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Early Termination of Lease

Early Termination of Lease

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