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Early Lease Termination: A Guide to Landlord’s Rights and Responsibilities

Early Lease Termination: A Guide to Landlord's Rights and Responsibilities

 

When your tenant requests an early lease termination, you find yourself in a precarious situation. Most tenants who sign a lease intend to stay for the full term. However, sometimes life happens, and early terminations occur. As with any written contract, breaching the terms within the lease does not come without consequences. That said, understanding the valid reasons a tenant is allowed to break a lease agreement under the law is vital. Additionally, knowing what to expect should the unexpected happen, you may be able to ward off additional problems. Continue reading below to find out more!

How to Address Lease Breaks in Your Lease Agreements

When your tenant signs a lease, both you and the tenant have entered into a legally binding agreement. The provisions within this contract commit the tenant to live in your rental home for a specific period. Thus obligating them to pay monthly rent for the duration. As a landlord, you must ensure the original agreement addresses situations such as breaking the lease.

First, it is essential to outline clearly what will happen should the tenant decide to break the lease. You also may wish to include a statement that the lease agreement is legally binding and that there are specific legal ramifications that may ensue should the tenant break the lease early.

In general, strictly enforce the lease, though you may wish to negotiate a clause that allows your tenant the choice to terminate at any time with notice. Additionally, you may allow the option to break the lease due to job relocation. When offering these early termination options, include a provision that requires paying a penalty fee.

Sample Early Lease Termination Clauses

Sample Early Lease Termination Clauses

Option 1: “Either the Landlord or the Tenant may end this lease on the Break Date by serving not less than one month’s prior written notice on the other party. This lease shall then end on the Break Date provided that in the case of a notice served by the Tenant, the Tenant has paid all of the Rents due under this lease up to and including the Break Date unless and to the extent that the Landlord in its absolute discretion elects in writing to waive these conditions. Any overpayment of Rents shall be refunded to the tenant within 14 days of the date of determination of the lease.”

Courtesy of: https://www.lawinsider.com/clause/break-clause cursor=ClMSTWoVc35sYXdpbnNpZGVyY29udHJhY3RzcjQLEhlDbGF1c2VTbmlwcGV0R3JvdXBfdjE5X2VuIhVicmVhay1jbGF1c2UjMDAwMDAwMGEMGAAgAA%3D%3D

Option 2: “During the initial term of the Agreement, Tenant(s) shall have the option to terminate the remaining responsibility for rent due for the balance of the lease term by providing Landlord with written notice of not less than thirty (30) days together with payment of an early termination fee equal to TWO (2) MONTHS RENT. The Agreement terminates upon Landlord’s receipt of a proper written notice (signed by all tenant (s)) and payment of the early termination fee and all rent and other charges due through the date of the tenant (s) vacating the Premise. If the tenant (s) fails to timely vacate, pay the early termination fee, or pay any other charges due through the date of vacating, the attempted early termination permitted by this provision shall be deemed void. The other provisions of this Agreement shall apply.”

Courtesy of: https://www.landlordology.com/moneymaking-lease-clauses/

Why Having a Residential Lease Agreement is So Important?

A legally binding contract is worth its weight in gold. Whether dealing with disputes, potential eviction, lease breaks, deposit, or maintenance concerns, a well-written lease is crucial to property management success. As a landlord, the rental lease you create needs to be reviewed by a lawyer. This ensures all bases are covered and clear. Be sure to include clauses that clearly define the division of tenant and landlord responsibilities. Doing so will help to minimize disputes in the future.

What Are Valid Reasons a Tenant Can Break a Lease?

Landlords need to be aware of the reasons tenants may break their agreement and what each of them means. So, we will examine the top 5 reasons tenants may legally vacate before the lease term ends, along with any special provisions they include below.

Top 5 Legal Reasons Tenants Can Break a Lease

  1. The Tenant is Starting Active Military Duty
  2. Tenant is a Victim of Domestic Violence or Sexual Assault
  3. Rental Unit Is Unsafe or Violates Maryland Health or Safety Codes
  4. Tenant is Harassed by You or Their Privacy Rights Are Violated
  5. The Rental Unit is Not Legal

The Tenant is Starting Active Military Duty

Under federal law, if your tenant is called to active military duty after signing a lease, they are allowed to legally back out with zero repercussions. The tenant must be part of the “uniformed services” – armed forces, commissioned forces of the National Oceanic and Atmospheric Administration (NOAA), commissioned corps of the Public Health Service, and the activated National Guard. The tenant must provide you written notice of intent to terminate the lease agreement. After written notice is received, the tenancy will end 30 days after the date that the next rent payment is due.

The Tenant is a Victim of Domestic Violence or Sexual Assault

Most state law indicates that should a tenant under a written lease agreement become the victim of domestic violence or sexual assault, the lease agreement may legally terminate regardless of how much time is left in the term. However, written notice must be given to the landlord should the tenant wish to go. Additionally, the tenant will be given 30 days to vacate the rental property upon receiving proper written notice.

The Rental Unit Is Unsafe or Violates Maryland Health or Safety Codes

Should you not provide your tenant habitable housing conditions under both state and local housing codes, the tenant may be granted constructive eviction by the court system. The tenant, if granted constructive eviction, will no longer be responsible for any monthly rent payments. That said, tenants must follow the proper procedures for leaving the inhabitable rental property. Doing so relieves them of any contractual duties. Only in severe cases will the tenant be provided this option from the courts.

The Tenant is Harassed by You or Their Privacy Rights Are Violated

Although some states do not set out specific laws regulating the notice, you must give your tenant regarding entering the rental property, that does not mean you can go in whenever you wish. Most often agreed upon is a minimum of 24 hours notice, if not more, except in an emergency. In fact, if you repeatedly violate your tenant’s rights to privacy or conduct behavior that is harassing in nature, that may be grounds for early lease termination with no further rental payment obligations.

The Rental Unit Is Not Legal

Requirements of rental properties vary from location to location, and it is the landlord’s responsibility to know the state laws. For example, if a rental license, state inspection, or lead test is required by law, this must be completed before a tenant taking occupancy. If the property a tenant is renting is an illegal rental unit, the tenant may terminate the lease without penalty. Additionally, tenants are often entitled to the return of some of the rent they paid plus extra money from the landlord to assist them in finding another apartment.

Can a Landlord Break a Lease Agreement Early?

The answer to this depends on your lease documents and the circumstances of why you are trying to end the term early. The legality of a landlord lease break is dependent on the terms and conditions of the lease. There are two ways in which this might be possible.

When Can a Landlord Legally Break a Lease?

  1. If the tenants violate the lease conditions
  2. When the terms of the lease specifically allow a landlord to terminate before completing the term

Ideally, the goal of property management is to keep good tenants in the home for as long as possible. This cuts down on the expensive turnover and releasing process. However, sometimes the need to get a tenant out is unavoidable. Providing you have a legitimate reason and your lease allows for you to seek early termination, it may be a possibility. Below we take a look at some legitimate reasons landlords may consider pursuing early termination.

Reasons a Landlord May Break a Lease

  • You are Selling the Property: If you plan to market to investors, retaining the current tenant may prove beneficial. However, if the market in your area leans more toward owner-occupied housing, it’s a good idea to pursue early termination.
  • Moving Back In: Depending on your circumstances as an owner, there may come a time when you need to move back into the rental. In that instance, you cannot do so until the current tenant vacates, and you will need to work with them on early termination.
  • Extensive Renovations or Repairs: With some types of repairs, unrestricted, and full access to the property is best. This means, though, that the home cannot be occupied for at least a period of time. Therefore, a lease break is necessary.
  • Troublesome or Illegal Tenant Behavior: When a tenant does not follow the terms of the lease, is destructive to the property, or engages in illegal activities, early termination is warranted. Depending on their level of cooperation, a notice to vacate may be enough; if not, a formal eviction is necessary.

Landlord Responsibilities If There is a Lease Break

Though most of the burden falls upon the tenant, some responsibilities fall on landlords that are essential to understand. To avoid any unnecessary conflict or wrongdoing, check out what duties a landlord has towards their tenants.

  1. Habitable and Safe: You must provide a habitable rental home according to state and local housing codes.
  2. Quiet Enjoyment: By renting your home to a tenant, you have to follow the covenant of enjoyment by which you provide your tenant with a quiet and safe place for them to live.

That said, should an issue arise, you are entitled to a reasonable amount of time to remedy the situation before the tenant can take action and legally break the lease. It is your responsibility to find a new tenant to occupy your rental home should a lease be terminated early.

What Are Landlord Responsibilities to Mitigate Damages?

What Are Landlord Responsibilities to Mitigate Damages?

According to some state laws, the landlord must make reasonable efforts to re-lease their rental property. This is regardless of the reason the tenant chooses to leave. This is called mitigating damages. The tenant will only be financially responsible for rent payments up until the newfound tenant leases your home.

  • Landlords must try to re-rent your home quickly and efficiently.
  • You are not responsible for placing this rental property ahead of others you may be trying to lease.
  • A landlord does not have to accept a subpar tenant to re-lease your property. Such as someone with insufficient income or poor credit.
  • You do not have to rent the property below fair market value to fill the vacancy.
  • Property managers or landlords may charge the tenant breaking the lease (or use a portion of their security deposit) for any costs related to re-renting your property.

How Landlords Can Recoup Costs of an Early Lease Termination

Once a tenant makes you aware of their desire to terminate in writing, it is your turn to take action. Review the terms outlined in the lease with your tenants and begin the process of finding a new tenant. In addition to finding a new tenant, there are a few ways landlords can recoup some of the losses related to early termination. These are terms you can work into the lease as both a deterrent and guideline should the situation come up. Check out these options below.

Options for Landlords to Recoup Costs

  1. Continued Responsibility – The tenant signed a legally binding contract that makes them responsible for the term of the lease. When a lease break occurs, the landlord is legally obligated to find a new tenant to mitigate damages. However, in the meantime, the tenant is still responsible for the rental payments up until a new tenant is found. Once found, they are off the hook.
  2. A Lease Buy-Out – Many factors can contribute to releasing the property. You never know what your situation or circumstances will be. So, considering a flat buy-out fee as part of the lease is an option. This frees the tenant from the responsibility for the remaining portion of the lease, while also giving landlords cash to cover a few months of vacancy. Typically, a lease break fee is equal to two months of rent.

What Landlords Should Avoid When Tenants Break Lease

  • Steer Clear of Subletting – When early lease termination occurs, a tenant may offer to find a new tenant on their own. This may sound like a good idea, but it is not worth the risk. That said, they are more than welcome to find qualified applicants as options for you. However, any applicant must be vetted by you. At no time should landlords allow a tenant to make any commitments or agreements on your behalf.
  • Reconsider Seizing the Security Deposit to Cover Lost Rent – The security deposit should not be used to cover lost rent in the event of early termination. Keep in mind that the security deposit is in place to protect your investment against damages. Therefore, allocating those funds towards anything else other than damages leaves a landlord vulnerable to losses.

 

Final Thoughts

In the end, having an early lease termination is a tough thing to handle. The best way to protect yourself is with a properly written lease. Are you a new or existing landlord unsure of the legality of your lease? If you are not 100% you and your property are fully protected, contact an experienced property management firm today. Bay Property Management Group takes the guesswork out of property management with a dedicated staff combined with tried and true processes. Give us a call to see how our services can get the most out of your investment.