A husband and wife signed a lease for one year the end of last month. They were scheduled to move in a week from now. They called me today to say that the deal on selling their house fell through and now they can’t rent our property (single-family residence). Do I have any recourse? Can I keep the deposit to cover me until we find a new tenant?
What does your lease agreement say? Once the lease agreement is signed, you and the tenants have a binding legal contract. If the lease agreement did include a contingency regarding the sale of their house, your options would be limited to the terms of that contingency. If not, your lease agreement terms and conditions govern tenant obligations and defaults.
You should require for your records that the tenants notify you in writing that they intend to break their lease agreement by not moving in. By terms of the lease agreement the tenants are legally liable for rent for the entire term of the lease agreement (whether they would occupy the rental property or not). By breaking their lease, the tenants are liable for any other actual expenses such as additional advertising or marketing costs in a landlord’s efforts to find a replacement tenant.
In most states, however, you as the landlord have the duty to mitigate damages and take reasonable effort to re-rent the property as soon as possible.
You could consider negotiating a written cancellation of the lease whereby you let them out of the lease for some consideration, as example, a month’s rent. If you have already collected a security deposit, you could apply the security deposit toward rent owed until the property is re-rented. Any unused portion of the security deposit would be refunded to the tenant. If the rent amount due exceeds the security deposit amount, the tenant will be liable for the difference and all future rents until a replacement tenant is installed. Applying the security deposit to rents may be a problem for a landlord if the tenant refuses to cooperate once the security deposit is used up. You could instead require the tenant to pay rent each month until the property is re-rented. The full amount of the security deposit would then be refunded to the tenant in the manner and timeframe as required by state landlord-tenant statutes.