Even with the best of intentions entering a lease, life happens. Tenants may need to transfer or break a lease for various reasons, including military service or job relocation. However, regardless of the transfer reason, landlords must protect themselves and their interests. So, join us as we define the types of transfer clauses and, more importantly, why every lease should have a tenant transfer policy!
What is a Transfer Clause in a Residential Lease?
The purpose of a tenant transfer clause is to minimize confusion if the tenant must move out before the end of the lease term. Typically, a residential lease is for a fixed term and includes various lease clauses, including a tenant transfer policy. Generally, this covers incidents where the tenant must vacate for work or life changes. The goal of a tenant transfer policy is to outline specific terms, including –
- Permitted Reasons for Tenant Vacating Early
- Sublet – Either Denying or Giving Permission
- Notice Requirements
- Fees or Any Financial Penalties
The main job of a lease is to protect the landlord and the tenant from confusion, potential conflict, or miscommunication by creating a predictable process if the tenant breaks the agreement. While no one sets out to break a lease, it is essential to have a plan, and a tenant transfer policy is written out just in case.
Therefore, this clause allows landlords some reassurance that they can expect some financial compensation and an agreed-upon amount of notice. That said, not having such a clause could result in an expensive and lengthy battle in the courts to recover unpaid rent or damages.
Common Types of Tenant Transfers
Like we mentioned above, life happens, and being prepared for contingencies is crucial as a landlord. Continue reading as we describe a few of the common reasons for a tenant transfer policy below.
The most common tenant transfer policy deals with changes in employment that cause a tenant to relocate. For example, a company transfers a tenant from their current location in Pennsylvania to New York’s headquarters. Generally, this clause allows the tenant to break the agreement with the following provisions –
- Relocation must be a non-commutable distance
- 30 to 60-day notice is required in writing
- Pay the penalty equal to up to 2 months’ rent and/or forfeit the security deposit.
Alternatively, some landlords may choose to require the tenant to be responsible for the remainder of the lease until a new tenant is found. Also, tenants may offer to find their own tenant to take over the lease, otherwise known as subletting. Therefore, it is imperative to state that no assignment or sublet is permitted without the landlord’s expressed written consent. If the tenant breaking the lease has someone willing to rent the unit, they can forward that lead to the owner. Owners or property managers can qualify the lead based on their standard rental application and procedures to determine if they are a good fit.
Military Order Transfer Clauses
Like a tenant transfer policy for a job relocation, this clause covers tenants relocated due to military reassignment. So, this allows active military personnel the option to break the lease agreement if the tenant is –
- Called for extended service away from the area or overseas
- Transferred to a different base, not within commuting distance
- Assigned to a new installation out of the area
A military tenant transfer policy typically requires between 30 and 90 days’ notice, depending on the situation. However, there are a few key points landlords must understand when it comes to a service member breaking lease. Check out these important factors below –
- Federal law allows military members and their spouses, if both names are on the lease, to terminate a rental agreement without penalty for either a reassignment or a deployment longer than 90 days. This is known as the Service member Civil Relief Act and applies whether the lease has a military clause or not.
- Military tenants must still provide written notice to the owner along with a copy of the orders or an official letter from their commander.
- Service personnel must still pay for any damage left behind in the unit, and owners may deduct from the security deposit per the terms of the lease.
In larger multi-family properties, landlords may come across requests for tenants to transfer to a new unit within the same property. That said, there are various reasons why a tenant may request a transfer, such as –
- Trouble with current neighbors
- The desire for a smaller or larger unit
- Need for easier access to certain parts of the building or desired amenities
- Looking for a newer or remodeled unit
However, there are important things for a landlord to consider when creating a tenant transfer policy. On the positive side, a transfer request means the tenant wants to continue to rent at the property, which is great! Unfortunately, if the unit the tenant is leaving is old or undesirable, it may prove difficult to fill efficiently. That said, the newly created lease allows landlords the opportunity for added profits. This is a chance to raise the rental rate and charge an administrative transfer fee to help offset costs, similar to processing a lease renewal.
How to Best Protect Your Rental Property Interests as a Landlord?
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As Harrisburg’s leading rental management firm, we focus on a full-service approach to property management. Moreover, we handle all the day-to-day operations, so our clients do not have to. Give us a call today for a free no-obligation rental analysis to see how our experience can work for your investment!