How Does Landlord Handle Early Termination Of Tenants Lease?
Question
I’m unable to find any clause in the lease agreement form I use that deals with “early termination.” Is it fair to ask for the remaining months’ rent if tenant has to break the contract before the 12 months of lease expires?
Answer
It is not a question of fairness. Both signatories to the lease agreement, landlord and tenant, signed a binding contract that stated terms acceptable to both at the time the document was executed. Neither the landlord nor the tenant can unilaterally terminate the lease during the specified lease term. Even a month-to-month lease requires a notice period of at least 30 days for either party to terminate the lease, with the law in some states requiring even longer notice by the landlord under certain circumstances.
A tenant who breaks his lease agreement remains liable for the rent during the balance of the lease term. However, unless the tenant pays that amount upon breaking his lease, the landlord will want to find a new tenant immediately because the landlord should realize that he/she may never be able to collect the rent for the remaining time of the lease. Landlords must also be aware of the laws of his/her state. The laws of many states require the landlord to make “reasonable” effort to re-lease a unit as soon as possible after a tenant has broken the lease, taking into account, of course, the time required to both prepare the unit for marketing and the time required to find a new qualified tenant, the latter depending significantly on the then market conditions. This means that the tenant will often not end up paying for the entire term of the lease agreement even when the tenant is held responsible for the entire lease, particularly when the break comes early in the lease. Some states specifically forbid the landlord be paid rent by both the old tenant and the new tenant for the same period.
Most lease agreements, including the ones provided on our Web site, are very basic documents. Such basic agreements do not include every possible clause that might be important for every type of property or that might be desired by every landlord.
During more than 3 decades experience in property management I have generated a significant number of customized lease agreements, for many types of properties, both residential and commercial. I have never had a reason to include a clause that allows the tenant to unilaterally break the lease without penalty.
However, I have many times allowed tenants to break the lease with my permission for a specific reason, for example, a bad tenant for whom I felt early termination would also be beneficial to me even though it might result in an earlier vacancy. In either case, it was very seldom without penalty for the tenant, although the tenant’s penalty was almost always significantly less than that which would have been allowed by law and the lease agreement.
When a particular tenant needs to break the lease due to unexpected circumstances – as examples, employment transfer to a distant location, financial difficulty due to medical expenses, or employment termination – none of which allows the tenant to break the lease – the landlord and tenant are free to negotiate a termination that is acceptable to both parties.
If, for some reason, you really wish to provide for unilateral termination by the tenant in your lease agreement you need to be sure that the conditions are stated in sufficient detail and clarity that will minimize the chances of misunderstanding or disagreement. However, I would strongly suggest that cases which might benefit from mutually acceptable termination are best handled on an if/when needed basis rather than by a clause in the lease agreement.
If there is some reason that the tenant or the landlord anticipates a need for early termination, a month-to-month lease will usually be a better option if agreeable to both parties.
The only scenarios that come to mind regarding the legal need for unilateral termination of a long-term lease by the tenant without penalty has to do with domestic violence problems and for military personnel who are being transferred or deployed under certain circumstances as provided for in federal or state laws. However, some states or municipalities might allow tenants to unilaterally terminate for other circumstances.