Ending a Tenancy – Part 2
Ending a Tenancy – Part 2
Ending a tenancy should be a matter-of-fact business transaction regardless of whether the tenancy was a periodic tenancy or a fixed term lease with a date certain beginning and ending date. Knowledge and compliance with applicable laws – landlord-tenant, fair housing laws, and consumer protections – will be required to properly plan and prepare for ending a tenancy.
A landlord can terminate a tenancy for a variety of business reasons but cannot terminate a tenancy for discriminatory reasons or in retaliation for a tenant exercising a legally protected right. Discrimination is illegal under federal, state, and local fair housing laws. State and local laws may regulate how a tenancy may be terminated with specific lease language, notice requirements, rent control protections, retaliation remedies or other landlord-tenant obligations and duties.
A lease agreement is a legal contract between landlord and tenant that generally precludes one party from unilaterally ending the tenancy unless there has been a material violation of the lease agreement by the other party. The landlord is obligated to provide the tenant with habitable living conditions and the tenant promises to pay the landlord the stated amount of rent for the fixed term. Typically a lease agreement is for a term of one year. The tenancy under a fixed-term lease agreement will end of its own accord on the expiration date as set forth in the lease agreement.
Provided the landlord is in compliance with applicable statutes and in accordance with the lease agreement language, with proper notice and in most circumstances the landlord is not obligated to renew a tenant’s lease. When the lease term ends, both parties can move on.
Even though the lease agreement clearly states the term of the lease with the expiration date, it is advisable, and a requirement in some states or localities, to give reasonable, written notice to the tenant that the lease will be expiring. This reminder notice, generally at 60 days before the lease expiration date, accomplishes several things. First, it allows the tenant sufficient time to look for another rental unit if either the tenant or landlord does not want to renew the lease. Second, it allows time for the landlord to renegotiate the lease if he would like the tenant to stay on but with different lease terms or rents. Third, it allows time for the landlord to begin planning for the vacancy and possibly shorten the time the unit may be vacant.
At the end of the lease term the tenant has options – he can move out; he can accept a new lease from the landlord with either the same terms or different terms; or he can accept a month-to-month tenancy.
If the tenant does not choose any of the above options, stays beyond the end of his lease term without the landlord’s consent, and the landlord does not accept offered rent from the tenant, the tenant is considered a holdover tenant and the landlord may take action to evict the tenant.
In many states, if the lease has expired but the landlord continues to accept rent, a new month-to-month tenancy will be created with the same terms as the old lease. A new termination notice must be delivered to end the tenancy.
In some states, however, if the lease has expired and the tenant continues to pay rent, a new lease is created for the same length and terms as the old lease. It becomes an automatic renewal of the lease under exactly the same terms as the old lease. Both parties are bound by the new contract agreement. Accordingly, if a change of any lease term is desired by either party, it must be accomplished before the expiration date.
If the lease has expired, a landlord may agree to extend the tenancy for a short period at a prorated rent. A written agreement should be prepared for the tenant’s signature detailing the terms of the agreement.
Some landlords utilize a lease agreement that contains a tenant buyout clause or specifies the terms and conditions for an early termination of the lease. Before utilizing such an agreement the landlord should ensure all lease clauses are in compliance with applicable laws. If the tenant completes the requirements of the buyout or agrees to the terms for an early termination, the tenant obligations cease.
There can be certain circumstances whereby the tenant has legal justification to end his tenancy before his lease expiration date. Most state laws allow a tenant to be released from his/her lease obligations for situations of domestic violence, military service, material violations of the lease by the landlord, or damages to the rental property from natural disasters beyond the control of the landlord. In some states a tenant may be released from his lease obligations because of job relocation or for reasons of health or age.
A federal law, the Servicemembers Civil Relief Act (SCRA) provides for early termination of residential leases for all active duty servicemembers, reservists, and members of the National Guard. Under SCRA, with proper notification to the landlord the tenant, spouse or any dependent listed on the lease agreement can terminate the tenancy without penalty.
In most states if the tenant simply breaks the lease and leaves, the landlord is obligated to minimize damages and re-lease the property as soon as possible rather than leave it vacant and require the tenant to continue paying the rent for the remainder of the lease term.
Recovery for any losses for unpaid rent, property damages, and other expenses incurred due to the default by the tenant that are not recoverable from the security deposit may be sought through a lawsuit.
Determining whether the tenant has actually given up possession can be an issue if the tenant has not given any indication of vacating. A landlord must be aware of any specific requirements by state statute, as requirements vary significantly among states. Some states have statutes that define how a landlord may proceed to recover possession when the tenant appears to have abandoned the premises. When state statutes define procedures, the lease agreement should include the procedures as defined.
For example, a state may specify that the landlord does not have possession absent a specific action such as the keys being turned in. Absent such an action, state law may require that the landlord perform “abandonment” procedures or commence a forcible detainer action (eviction).
Each state has its own laws regarding how a landlord must handle personal property that appears to have been abandoned by the tenant without any certainty that such was the intent. At one extreme, some states do not have a specific law regarding the issue and landlords must only use common sense when deciding what to do. At the other extreme, some states have statutes spelling out detailed procedures for dealing with abandoned property that must be followed even when the lease has expired, the tenant is no longer occupying the premises, and all personal property except for a few items has been removed. These procedures often include the requirement of secure storage of the personal property, specific notifications to the tenant regarding the matter, holding a public sale of the personal property, and accounting for funds realized from the sale.
A tenant who refuses to vacate upon termination of his lease or who fails to correct a noticed default of a material term of the lease agreement, including non-payment of rent, can only be removed through the judicial procedure of eviction.
No matter how the tenancy is being terminated, a landlord should provide a move-out letter to the tenant prior to the termination date. The letter serves to remind the tenants of the terms and conditions they agreed to when they signed the rental agreement. This can be particularly useful in avoiding disputes with tenants at the last minute.
In the end, there are legal procedures that be followed for proper termination of the tenancy including preparation and service of termination notices, security deposit accounting and return, move-in/move-out checklists and regaining possession of the rental unit.
Good attention to detail is as important in the exiting of the tenant as it is in the screening and selection of the tenant.