Tenant Trouble: The Trick to Breaking Leases

Sometimes, though not very often, we encounter tenants who no longer want to fulfill their obligation to pay rent through the end of their lease agreement.  Sometimes these situations are brought about by job loss, illness, or sometimes even just impulsive behavior.

Regardless of the cause, a lease agreement is a legally binding contract.  The landlord promises to keep the premises habitable and the tenant promises to pay rents and maintain the good condition of the property.  A failure to fulfill the contract can potentially have significant legal and financial consequences for a tenant.  

So, what is a landlord to do in situations where a tenant wants out?  I have found there are two approaches to this issue that work:

The Buy Out

In The Buy Out option, we charge the tenant two months rent in a lump sum.  The tenant's lease is terminated upon receipt of the funds and they move out at that time.  In this case, we typically will refund the tenant's deposit if the home is returned in good condition with all outstanding bills paid.  While this is a fair option, I have only had a few tenants choose this route due to the high up front cost.  Nevertheless, when it has been used, it has worked out well for both the tenants and the landlord.

Rent Responsible

With the 'Rent Responsible' option, the tenant will move out and pay rent until the property is leased again.  However, the deposit is forfeited in the process.  This has been the most popular route for tenants to follow in exiting a lease agreement.  Typically, since they want the property to rent soon, they will clean it and make it presentable with little hassle.  If the property rents quickly, they will owe very little in rents.  This is typically a win win scenario for both parties as well.

Scorched Earth

A third (and perfectly legal) option is for the landlord to demand the full terms of his lease.  This, of course, is a very adversarial approach and means that the tenant who will not pay their rent must face a massive judgement in court when a judge rules in favor of a landlord who demands that the terms of his lease be upheld.  

I am a big believer in win-win scenarios when possible.  Landlords don't want to be left holding the bag for another person's poor decision making.  Yet, they understand that sometimes hard situations are difficult to avoid.  So, the next time you find your tenants between a rock and a hard spot and needing to vacate a rental property early, consider The Buy Out or Rent Responsible options to keep the mortgage paid while you market the property to a new tenant.