How to Handle (and Prevent) Early Lease Termination
Early lease termination occurs more often than one may think, so it’s essential to know why it happens and to be adequately prepared for if and when it happens. And by being well prepared, it’s also possible to prevent early termination.
Follow these tips so you’re not caught off guard.
Reasons for Early Termination
Depending on the state and locality, there are some circumstances in which tenants are allowed to formally break the lease without any rent obligation after the notice period. This may include:
1. Active Military Duty
According to the War and National Service Members Civil Relief Act, tenants are permitted to break their lease early if they’re going into active military duty in one of many services.
In such cases, tenants have to give 30 days notice of early termination, after which they aren’t obligated to make any more rent payments.
- National Guard
- Public Health Service
- NOAA Corps
- Armed forces more than 50 miles away
2. Breaking a Month-to-Month Lease
The amount of notice that a tenant has to give to break a month-to-month lease depends on local laws.
3. Divorce, Illness, or Job Transfer
Surprise life events such as serious illness, divorce, or non-negotiable job transfer are all causes of early termination requests.
In these cases, allowing early termination can save you more time and money than eviction. If accommodations are not provided in these circumstances, then the tenants may take their frustration out on your property or reputation.
If you permit early termination, then the tenants will probably be obligated to pay the rent while the property is vacant. During this time, you are legally required to actively look for new tenants.
4. Domestic Violence
People subjected to domestic violence, stalking, abuse, or sexual assault are permitted to break their lease early so long as they have the necessary paperwork. After providing the early termination notice, the tenant will not be required to pay any rent after 14 days.
5. Intrusion of Privacy
In most states, tenants are guaranteed 24 to 48 hours notice before a landlord or property manager enters their property. This, however, is a common lease violation.
If the tenants’ right to privacy is violated repeatedly, the tenant could report a code violation or sue, resulting in withheld rent, early lease agreement termination, or financial penalties.
6. Lease Agreement Violations
Leases can also be terminated early if the tenant violates any parts of the lease agreement.
The most common reason is the failure to pay rent, which makes knowing how to evict a tenant who doesn’t pay rent necessary skills for a property manager.
Other reasons include:
- Unauthorized pets.
- Letting someone move in without permission.
- Noise problems.
- Intentionally damaging property.
7. Loss of Employment
If your tenant is unable to pay their rent because of reduced hours, wages, or layoffs, it may be easier to allow them to terminate their lease early rather than going through the motions of an eviction.
Although, it’s essential to follow all legal stipulations if considering an eviction in a time when there are eviction moratoriums, such as during the coronavirus pandemic when the CDC eviction moratorium and California AB 3088 disallowed evictions. Otherwise, consider an early termination fee to balance out some of your income loss and let your tenant break the lease.
Two month’s worth of rent is typical for a fee.
8. Uninhabitable Rental Property
An implied right of habitability is one of the things required of property management by law. It means that tenants are guaranteed the right to a livable space. Depending on the state, if this right is violated, the tenant may break the lease with zero responsibility to pay any remaining rent.
This usually happens if a significant issue goes unaddressed, like no electricity, gas, plumbing, leaks in the roofs or walls, or health hazards. To make sure this doesn’t happen, never falter in your maintenance and diligently document all mitigating measures and repairs.
How to Mitigate Early Lease Termination
1. Go Over the Lease With Your Tenant
Tenants often don’t read over their leases closely or even house rules concerning serious matters like fire prevention. For this reason, it’s a good idea to go over the lease with your tenants so that you know they’ve read it through at least once.
Additionally, the eviction process has real costs, and going over your lease agreement with your tenant before they’ve moved in is one of the best prophylactics available.
2. Find a New Tenant
This is when knowing how to write a great rental listing pays off. It’s the onus of the landlord to find a new tenant as opposed to having the vacating tenant find a replacement. Despite the unexpected vacancy, the potential tenant should receive as thorough a screening as any tenant.
Even if the tenant does help by recommending a replacement, it’s best to finalize the early termination and prepare a new lease for the new tenant to reduce the likelihood of liability and confusion.
3. Write a Lease Clause
Include an early termination of lease clause in your lease agreement to ensure a copesetic process. With a lawyer’s help, outline:
- Minimum notice
- Early termination fees
- Written notice requirements
- And more
4. Require a Termination of Lease Agreement
Have your tenant provide a written and signed notice of early termination for your records. Before the tenant leaves, make sure all payments have been finalized.
5. Offer a Buy-Out
Landlords can keep charging rent until a replacement tenant is found. For this reason, the current tenant might find it appealing to pay a non-refundable fee known as a “buy-out” that allows them to terminate the lease and move out. Since an early termination fee is usually two months, a tenant who has more than two months left on the lease might find this deal particularly appealing.
If you find someone in less than two months, you don’t have to refund the vacating tenant a prorated amount for the overlapping time. Simultaneously, if the tenant search takes more than two months, you can’t ask for more money.
A buy-out option is also an excellent way to avoid having to take your tenant to court for unpaid rent.
6. Don’t Use the Security Deposit for Rent
Early termination doesn’t mean you should use the security deposit to pay rent. Instead, perform your property inspection as you usually would to see if you need to use any security deposit for repairs or cleaning.
Knowing how to handle early termination is one reason to use a property management company because it demands so much from landlords.
You have to consult the law, market your property, screen tenants, deal with the vacating tenant, prepare the property for the incoming tenant, and more.
Even if you follow all the tips for easy rental tenant turnover management, there are still many factors in play.
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