So your tenant wants to break the lease early. Now what? Seasoned Property Managers have seen this before. The tenants have signed a legal document that binds them to the terms, including to pay rent through the move-out date you, the landlord, specified. However, as much as the lease serves to protect the landlord, there are laws are in place to protect tenants when they want out. As a property owner, it’s important you know how to handle these situations to make sure you communicate clearly and fairly, follow legal protocol, and ultimately, meet your bottom line.
Why Does the Tenant Want to Terminate their Lease Early?
Tenants want to break their leases for a bunch of different reasons—personal, professional, or because the landlord breached the lease. Depending on the reason, the landlord might be legally bound to release the tenant without damages (as long as the tenant follows protocol). In other situations, it makes sense to be compassionate and work with the tenant to find a solution.
Job Loss: It makes sense to be compassionate here. If your tenant can no longer supply the income that would allow them to pay rent, it doesn’t make sense for them to continue living in your rental. At this point in their lives, they wouldn’t have been able to pass the screening criteria you set forth when you rented the unit to them. Allowing them out of the lease is much less time consuming, arduous, and expensive than pursuing an eviction or getting a debt collector involved. Work with your tenant(s) to find a solution that works for both of you.
Divorce/Illness: Just like a job loss, a divorce or serious illness can severely impact your renters’ finances. Even though you’re not legally obligated to release your tenants from a lease in these extenuating situations, giving your tenant(s) an out makes a tough situation a little easier for all parties involved. For example, when a couple in your unit decides to split, rental payments could become a major source of contention. Similarly, if a tenant shares with you that they have to vacate because of a death in the family (either a co-tenant or a relative), or because of a serious illness, it’s advisable to be compassionate.
Job Transfer: Your tenants don’t have control over their job transfers, and some state laws allow tenants to break their lease for this reason.
Uninhabitability: As a landlord, you’re obligated to provide a safe and habitable place for your tenants to live. That means working gas, heating, electric, plumbing systems; operational sinks, toilets, showers; non-leaking roofs and walls; freedom from health hazards and pests; etc. If the unit is not livable or you’re unresponsive when a safety issue presents itself, your tenants are legally allowed to break the lease and walk away without covering your damages for loss of rent. After all, you’re not holding up your end of the bargain.
Intrusiveness: Though you own the property, you don’t have the right to enter it as you please. You must give your tenants a minimum notice for entry unless there’s an emergency. Tenants have the right to privacy, and if you violate that, the tenant may break the lease. However, tenants must first give you a formal written warning telling you to stop coming over unannounced. Rarely may tenants break the lease for this reason without a written notice on the books.
If the tenant found a place they prefer, is moving in with their partner, plans to buy a home, or is relocating out of town, the landlord is not on the hook to release them early.
Pro tip: Be prepared for your tenant to present false charges citing inhabitability or intrusiveness if they want to get out of paying you and the issue escalates to court. Keep maintenance records and photographs to show you maintained the unit well and made repairs quickly.
Your Duty to Mitigate Damages (Search for a New Tenant)
When your tenant sends you a formal early termination of lease letter and plans to vacate the unit prior to the end of the lease, in most jurisdictions you’re obligated to search for a new tenant (legally coined “mitigate damages”). Legally, you can’t hold the tenant to the terms of the lease and collect rent from them while the unit passively sits vacant through the end of the lease.
Even if your tenant decided to end the lease during an off-season or at a time inconvenient to your schedule, you must make an effort to re-rent the unit. You might have to go through the same procedures you normally would at the start of the season, like marketing the rental, showing the unit to prospective renters, and so on. However, you don’t have to rent to the first person who indicates interest. You still must complete your screening process to be sure the applicant meets all of your criteria.
While you’re searching, your tenant is still responsible for paying rent. And in a few areas, you can hold the original tenant liable for all of the rent through the end of the term. However, once you fill the unit, your previous tenant is off the hook. Collecting double rent payments on the same unit is downright illegal.
Do Not Let the Tenant Find an Informal Sublet
As an act of good faith, the tenant might offer to help find a new tenant. This is not required but can facilitate the process. You can also formally ask them to help you. As you would for any applicant you’d find on your own, screen the applicants the tenant finds and hold them to the same requirements.
Note: Do not allow the tenant to make commitments on your behalf by informally finding a sublet. You want to maintain your control over who you allow to live in the unit to make sure they’ll be good tenants and not damage your property or cause problems.
Should You Let Your Tenant Terminate Their Lease Early?
As always, it depends. Your relationship with your tenants and reputation as a landlord matters just as much as your bottom line. You can’t make them stay, but you can remind them of their obligations on the lease continue to hold them financially responsible until you fill the unit. A rock-solid lease will help you out and make sure you’re compensated when tenants want to leave. Additionally, consult with an attorney any time you think your rights and responsibilities outlined in the original lease may change as well as to avoid the instance of a lawsuit (initiated by either you or the tenant).
Keep in mind that if you let one tenant break their lease and not another, you run the risk of discrimination. It’s best to have a policy you can apply to all tenants.
Managing your tenants, finances, and documentation is a lot of work, especially when things get complicated. Consider bringing on a property manager to handle all of the ins and outs of tenant turnover and leasing, communication, and more. If you’re ready to start looking for a property manager in your area, Real Property Management Service in Toronto can help.