After a tenant signs the lease, you’re likely to expect they’ll stay for the entire term. But a tenant might decide to leave early and break the lease. What should you do?
Your tenant probably had every intention of renting from you for the entire lease period, which is typically a year, or maybe even longer. But lots of things can happen—job loss, job transfer, the opportunity to buy a house, etc. If your tenant wants to break the lease, they probably have a good reason.
Can you hold them financially responsible?
Of course, you can’t make a tenant stay. But can you can hold them financially responsible for the remainder of the lease?
The answer is…it depends.
Even if your tenant has a good reason for breaking the lease, you still have some decisions to make.
Here’s a breakdown of what happens when a tenant decides to break the lease, with some options you should consider at each step.
A Lease Is a Binding Agreement
Just as a lease protects tenants from landlords kicking them out early for no cause, a lease also protects landlords from tenants who decide they want to leave early. When a tenant signs a lease, they’re agreeing to pay rent for the entire lease term, only they usually pay this amount in monthly (or bimonthly or weekly) increments.
For example, if rent is $1,000 a month, and the lease term is for 12 months, the tenant agrees to pay you $12,000 in 12 equal installments. If they want to leave early, say after six months, they should still owe you $6,000 – right?
There are, however, some exceptions:
1. Mitigating Damages
In most states, landlords are not allowed to hold the tenant to the terms of the lease while the unit sits vacant. In these states, even though the tenant has breached the lease by leaving early, the landlord must try to re-rent the place—even if during inconvenient times, like the middle of winter.
Your tenant is still responsible for paying rent, however, until you find someone to take their place. And you can still go though the same screening process you normally do when looking for a replacement tenant. In other words, you don’t have to rent to the first person who comes along if they don’t meet your requirements.
You don’t have to rent to the first person who comes along.
But in a few states, landlords are not required to try to find a new tenant. They can hold the original tenant responsible for the entire lease term. You can find out if your state has this law here.
2. Being Called for Military or Active Duty
Federal law allows people in the military to break their lease to start active military duty, or if their orders take them far away (approx 50 miles). This rule is called the Servicemembers Civil Relief Act, and the law applies to people in the armed forces, the activated National Guard, the National Oceanic and Atmospheric Administration (NOAA), and the U.S. Public Health Service.
Your tenant would need to give you a 30-day notice if they’re leaving for military reasons, even if they have time left on the lease.
3. The Rental Is Uninhabitable
When you have tenants, you must provide a habitable and safe place for them to live. You must provide a (non-leaky) roof over their heads. You must provide heat, hot water, doors and windows that lock, safe stairs, working electrical systems, and a pest-free place.
If you don’t provide a safe and livable place, and if you aren’t responsive if something comes up that makes the place unsafe or unlivable, your tenant could break the lease.
4. You’re Intrusive
It’s true that you own the place, but as soon as you take money from a tenant, you give up your right to come in anytime you like. There are times when you can come in, such as during an emergency like a flood, or when you’ve given notice to do a routine inspection or to make a repair. But tenants have a right to privacy, and if you violate that right, your tenant can probably break the lease.
Even if you act intrusively and don’t respect a tenant’s privacy, they still have to give you a “warning.” It’s call a “notice to remedy or quit,” and it’s a very simple letter that might say, “Stop coming over unannounced,” or, “I’m terminating the lease in 10 days.” Very rarely may a tenant terminate a lease immediately. If you received a notice to remedy or quit, you might want to talk to a lawyer to see if you’re violating any local or state laws.
Early Termination Fees
Continuing to charge your tenant rent, even after they’ve moved out, is acceptable as long as you are actively looking for a replacement tenant.
If the tenant who left would rather not pay the ongoing rent charges, they could pay an “early termination fee,” an amount that allows them to break the lease and walk away without any recourse. Unlike security deposits, these fees are not refundable. So even if the tenant opts to pay the “two-month termination fee,” equal to two times the monthly rent, you aren’t obligated to refund a prorated amount if you find a replacement tenant sooner than 60 days. However, if it takes you 90 days to find a replacement, you can’t force the previous tenant to pay for the third month of vacancy.
Make sure you outline the early termination fee amounts in your lease so the tenant has plenty of warning.
Receiving double rent is a no-no, but receiving an early termination fee and then rent from a new tenant is a generally accepted practice. After all, it’s the tenant’s choice and a way they can bet against paying three-plus months of rent.
They might choose to pay two months of rent now to avoid paying four months later. Sometimes it works in the renter’s favor, and sometimes it doesn’t.
How Tenants Can Help
If your tenant tells you they want to break the lease, ask them to help you out. They might be able to help find someone who can take over the lease. Of course, you should still screen whomever they find. Consider asking them if they can help show the place to prospective tenants who answer your ad.
About Suing Your Tenant
If your tenant breaks the lease and won’t pay for the months the unit is vacant, you might need to take them to court to get your money. Theoretically, you’d just need to present a copy of the signed lease, and state which months your tenant still needs to pay. You should be awarded a judgment, but please talk to a local attorney before taking any legal action.
Be Prepared for Your Tenant to Present False Charges
Some tenants, in an effort to get out of paying you, might come up with false charges.
They might claim the place was infested with rats and that you did nothing about it. Or they might claim the heat never worked, the place was unsafe, or you acted inappropriately by coming over all the time. Be prepared to defend yourself against false charges. Keep maintenance records, and have photographs to show how you maintained the unit.
If you inform your tenant they’re still financially responsible for rent until you re-rent the place (or until their lease period ends), they might choose to stay to avoid paying for two places at once.
Consider all these factors when deciding how to handle a tenant breaking the lease. Of course you can’t make them stay, but in many cases, you can be compensated for your extra efforts and added risk.