Lease Agreements Between Landlords and Tenants – Part 9
Lease Agreements Between Landlords and Tenants – Part 9
In Part 8 of this series we discussed some aspects of and issues related to commercial property lease agreements. In this Part 9 we’ll discuss some issues regarding termination of lease agreements.
Termination
Termination procedures vary somewhat, depending on whether a month-to-month (or other periodic) tenancy or a fixed-term lease tenancy is ending. There are times when the landlord is prohibited from ending a tenancy. First, rent control laws in a small number of jurisdictions, of course, restrict termination. Second, landlords cannot end a tenancy in retaliation for the tenant exercising any right under the law. Third, landlords cannot end a tenancy because of discrimination against any classes protected by fair housing laws.
Month-to-Month
Month-to-month tenancies can be terminated by either the tenant or the landlord by proper notice in accordance with a state’s law. In most states, landlords do not have to provide a reason for termination, but there are some states or local jurisdictions that require otherwise. For most jurisdictions the notice period for terminating a month-to-month lease is 30 days, although some jurisdictions require more notice from the landlords, for example 60 days.
Most states require that the tenant provide 30 days of notice for termination of a month-to-month tenancy. However, some states have different requirements under certain circumstances. The lease agreement should include your state’s notice requirements for terminating tenancy and require that the tenant provide written notice to the landlord.
Check state and local laws where your property is located to confirm the correct notice periods and whether or not a reason for termination must be given.
Fixed Term
Usually a lease for a fixed term simply ends at the end of the term unless a new lease, a lease extension, or a lease renewal is executed prior to that date or the lease provides for an automatic renewal clause if not otherwise terminated by the landlord or the tenant.
Failure to Vacate
It is not unusual that tenants fail to vacate when they should. When this happens, the landlord has two choices: (1) continue renting to the tenant or (2) remove the tenant through eviction.
In most states, if a landlord allows the tenant to continue paying rent, a month-to-month tenancy with the same terms as the previous lease will be created. This means that the landlord must provide proper notice in order to change the terms of the continuing occupancy. It is best to include a lease clause that discusses conversion to a month-to-month tenancy whether or not state law covers the issue.
Landlords should notify the tenant that the tenant is expected to vacate the premises by the termination date. The notice should be provided at least 30 days or more if required by state law ahead of time and 60 days is better. If the tenant must remain a few extra days, the landlord and tenant should execute a written agreement regarding the matter.
The potential for a tenant failing to vacate as scheduled is a major reason among several reasons why it can be risky to execute a new lease with a replacement tenant prior to the landlord gaining possession of an indisputably vacant unit.
Eviction
A tenant who refuses to vacate at the end of a fixed-term lease or upon termination of a month-to-month tenancy or who fails to correct a noticed default on a material term of the lease (including non-payment of rent) can only be removed through the judicial procedure of eviction. For detailed discussions regarding the eviction process see our “9 Steps to Eviction” Mini Training Guide.
Early Departure
When a tenant leaves before the end of the lease term and without paying the amount remaining under the lease, he is considered to have “broken” the lease. The landlord has the right to re-take possession if/when it is certain that the tenant intended to depart for good and to rent the premises to another. In general, the tenant is liable for rent for the remaining months of the lease. In turn, the landlord has a duty to mitigate damages, that is, make reasonable effort to find a replacement tenant. Recovery for any losses from unpaid rent, property damages, and/or certain other expenses incurred due to the default by the tenant that are not recoverable from the security deposit may be sought through a lawsuit.
Extended Absence
In order to avoid questions of whether a tenant has made an early departure, the lease should have a clause requiring the tenant to notify the landlord of planned extended absences, with “extended” typically defined as more than 2 weeks. The landlord should also regularly view his/her rental property and note any things observed that might indicate that the tenant has “skipped.”
Other Issues
Termination of tenancy sometimes results in other problems for the landlord even when the tenant created no serious problems along the way. Potential problems include the following:
- Riding down of deposit.
- Uncertainty of possession.
- Abandonment of personal property.
- Security deposit disputes.
Most of these problems can be avoided or at least greatly simplified by having the right clauses in the lease and following the law.
Riding Down Deposit
Some state laws expressly prohibit tenants from trying to use their security deposits as last month’s rent. However, whether or not the issue is covered by statute, lease agreements should prohibit riding down the security deposit rather than paying rent in advance for the final month of the tenancy. It should furthermore state doing so will subject the tenants to late charges for unpaid rent, to eviction proceedings, and a potential blemish on their credit records. If your state covers the issue by statute the statute itself should be referenced.
Uncertainty of Possession
Landlords should not take possession of the leased premises unless and until certain that the tenant has relinquished possession of the premises. Although this is only occasionally an issue, when it is, it can cause delays of at least a few days, and delays in collecting rent from a new tenant means lost income. It can even result in being sued by the ex-tenant.
The question of whether the tenant has actually given up possession usually becomes an issue when either (1) the tenant appears to be holding over after the expiration of a lease even though the tenant has not given notice of intent to do so or (2) the tenant appears to have abandoned the property in the midst of the lease term without have previously indicated that being a possibility. In the first case, the tenant has not (1) turned in keys, (2) written or phoned to confirm a planned departure, (3) given any other indication of vacating, or (4) removed all belongings from the property. In the second case, the tenant appears to no longer reside at the property even though months remain on the lease and some of his/her personal property remains on the property.
Minimizing questionable vacancy issues begins with including in the lease agreement clauses regarding procedures for vacating. That is, words as to what the tenant must do when vacating and what will happen if the tenant fails to act as agreed.
For example, in order to provide definitive knowledge of when possession has transferred, one clause could state that all belongings must be removed and keys must be returned when the tenant has vacated and that failure to do both will result in (1) continued accrual of rent, (2) charges for all costs related to disposing of the belongings, and (3) a locksmith charge and/or a new garage door opener if all items are not returned. Regarding the last item, landlords should always re-key all locks when the rental unit becomes vacant, but requiring return of keys can provide proof that possession had been returned to the landlord and allow the landlord to charge the departed tenant for rekeying and/or replacement of door openers when those items have not been returned.
Abandonment of Personal Property
Each state has its own laws regarding how a landlord must handle property that appears to have been abandoned by the tenant without any certainty that such was the intent. These laws vary from essentially no rules to extensive procedures that include secure storage and certain legal notices and the procedures requiring several months to complete.
In order to reduce the uncertainly regarding items left on the premises, a lease clause could state that any items left on the premises beyond the date of termination of tenancy shall be considered abandoned and may be disposed of as the landlord sees fit without contact with the tenant. While this is not certain to avoid liability in all states, it should at least provide some protection against the ex-tenant pursuing the matter.
Move-Out Letter
No matter how the tenancy is being terminated, a landlord should provide a letter to the tenant a couple of weeks ahead of the termination date. The letter should remind the tenant of a number of issues including reminder of certain ones specified in the lease. The letter could include the following:
- Expectations regarding condition upon vacating including any specific items the landlord wishes to list.
- Inspection and move-out checklist procedures.
- Items that can result in deductions from the security deposit.
- Need to provide forwarding address for any potential deposit refund.
- What else must be done to complete vacating – e.g., turn in keys.
Reminding tenants of what they agreed to when they signed the lease is particularly useful in avoiding disputes. Even when an eviction is underway, with the judge having given the tenant a period of time to vacate, a notice which reminds the evicted tenant that costs may increase if certain procedures required by the lease agreement (e.g., return of keys, cleaning, removal of all belongings) are not followed.