How to Collect Rent After Tenant Breaks the Lease

Q: If a tenant moves out and breaks the lease, how do you go about making him liable for the rent? If he moves, I would not know where he went or how to track him down. Since moving in, I know he has changed jobs so that would not be an option. How do you go about making him responsible for the rest of the lease. Hiring a lawyer is out of the question

If the tenant is still in the property but threatening to leave early, there are basically two options: give the tenant a warning that you intend to enforce the lease and will take action if he leaves without paying rent, or, work out an early move-out date with the understanding that the current tenant will remain liable until a new tenant moves in.

Some landlords opt for the latter strategy only because it may minimize income loss, and make it easier to get a new tenant into the property.

Generally, landlords are required to re-rent the property as soon as possible after it is abandoned, despite the lease agreement. So, the only rent that can be collected against the lease-breaking tenant is for the vacant period, and any shortfall in rent between the old lease and a new lease.

As far as tracking a tenant down, the information in the rental application, including emergency contacts and personal references, can provide clues as to the tenant’s whereabouts. The more complete and accurate the information in the application, the more likely you — or a collection service — will find the tenant after he skips out. This is one reason why it is crucial to verify the information in the application before renting to the prospective tenant.

Unless there is some local tenancy rule prohibiting it, you should be able to require tenants to update information in the rental application, such as a new job, emergency contact, or phone number. Also, develop the habit of noting banking information on monthly rent checks. That’s useful when it comes time to collect a judgment.

If the tenant tendered a security deposit, then he likely must reveal his new address, or it may be an option to request a forwarding address from the postal service.

Despite the tenant’s breaking the lease, if you are holding a security deposit, you still need to follow your local rules concerning any deductions and accounting for the deposit.

If the tenant skips out without paying the remaining rent,  you can demand payment or hire a collection specialist to collect the money owed.  A collection company may get better results, but will charge for the service.  Many companies will accept the debt on a contingency basis where you pay only if they are successful.

If the tenant contests the debt or won’t pay, you may be forced to pursue a judgment in court. It’s likely you will need a judgment in order to garnish the tenant’s wages or bank accounts.

You may have the option to use arbitration or dispute resolution, which can save money. Otherwise, landlords usually seek a judgment in their local smalls claim court. There, you will not need to have an attorney, but you will have to follow all of the court’s rules to the letter of the law or risk having the case dismissed with no resolution, or paying multiple filing fees.

At a hearing, the tenant will be able to raise defenses for breaking the lease. Those commonly include claims about the condition of the property. Be prepared. Bring adequate documentation to prove that the property was well-managed and the tenant did not raise repair or maintenance issues that were not met. The move-in checklist, the lease and records of communications may help overcome a tenant’s false claims.

Once you have your judgment, you can take more aggressive steps to collect the money from the tenant, including garnishments.

You also need to be prepared to find another tenant quickly. Be extra vigilant in screening this new tenant. Verify the information on the rental application, check the prospective tenant’s credit history, and speak with the current and previous landlords to minimize the chance of renting to another problem tenant.

Another valuable tool is signing the new tenant up to Report Tenant Pay Habits. This carrot-and-stick strategy of tracking rent payments and providing a Certificate of Satisfactory Tenancy serves as an incentive to those tenants who want to build a good credit history, and a deterrent to the others who don’t want to wreck their credit by failing to pay rent.

This post is provided by Tenant Verification Service, Inc., helping landlords reduce the risks of renting with fraud prevention tools that include Tenant Screening, Tenant Background Checks, (U.S. and Canada), as well as Criminal Background Checks, and Eviction Reports (U.S. only).

Click Here to Receive Landlord Credit Reports.

Disclaimer: The information provided in this post in not intended to be construed as legal advice, nor should it be considered a substitute for obtaining individual legal counsel or consulting your local, state, federal or provincial tenancy laws.

{ 3 comments… read them below or add one }

Anita April 30, 2013 at 5:26 am

How to collect back due rent and damages if no forward address is given?

Eric April 30, 2013 at 6:49 am

In 8 years I’ve had to collect skipped rents one time. Despite all the hassle of 2 small claims court appearances (where he stated he owed the set amount and agreed on a payment plan), no money was received. However, the “big break” came one year after I lost track of the tenant (moved, changed jobs, etc…) when we stumbled on him working at a dealership. Within 4 hours the lawyer familiar with the case had garnishment papers at the court and those garnishments began within two weeks.

One thing I learned regarding this was always get a judgement, even if you think they cannot pay. It cost me about $400 between the 2 cases (all of which was later paid by the tenant) but left me with the option to collect money when by chance our paths crossed again.

There were many other things I learned as well (rentals is a business and not a charity, the need for a great application form, the need for a thorough background check, etc.) all of which are brought up regularly in these posts.

Eric April 30, 2013 at 6:54 am

Anita – how to track down a tenant with no address is tough. (If it were easy there would be no need for collection firms.) In my case I used mail forwarding, watching the road for traffic, and information received from creditors who followed up with me as a reference for him. I’m guessing I could have used a credit report as well, but for me I’d direct those questions to a lawyer in your area. You can also get a judgement and then try to sell the debt to a collection firm who generally pay 25% of the amount (much less than owed, but it’s guaranteed money).

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