Tenant’s Early Termination Request Could Cost Landlord

Q:  I have a tenant who has fulfilled eight months of his one year lease. He and his wife have just had a new baby and now find the place too small.

They asked me in June if they could assign his lease to somebody else. I gave permission for him to do that – he wants to vacate by the 1st of August.

I thought I was being helpful and found a new tenant on my own (by dropping the rent by 100.00 a month). The problem is, my  new tenants aren’t prepared to take the lease over until the 1st of September. To complicate matters, my present tenant found a couple prepared to assume his lease for 2 years and are prepared to move in the 1st of August – which is when my present tenant wants out of his commitment.  Do I have to give him a refund on August rent (last month) since I have denied his choice of tenants because I already took a deposit from another couple who can’t move in until September?

I would like your advice. - TVS Landlord

One of the reasons that this situation is complicated is that it appears there were a series of miscommunications between you and tenant.

For instance, did you agree to relieve the current tenant from the lease as of August 1st?

With an assignment or sublet, it is important that the landlord provide some guidelines for who can move into the property.  It is imperative that each of these new occupants undergo a tenant background check to verify income, credit, and tenant-worthiness.  This will not only minimize the risk of income loss – a landlord owes it to other tenants who may be exposed to these new residents.

However, the situation you are describing sounds more like a lease termination. That’s because the new lease will run beyond the term of the current lease. This distinction will be a factor in determining whether you can collect the August rent.

Generally, a current tenant will be required to pay rent through the term of the original lease.  If they move out early, they will be liable for the remaining rent.  By the way, when renting to a couple, both should be obligated on the lease. 

It is entirely up to your goodwill whether to allow this tenant to break the lease early — and you are being kind by agreeing to accommodate the request to find a larger place for the tenant’s expanding family.  Unfortunately, if you told the tenants that they can leave on August 1st, it now may be more difficult to hold them to the original lease. Tenancy laws vary from one area to another, so it will take a legal expert in your area to sort that out.

Another miscommunication regards the potential August renters that your tenants found. What were they promised?  Did the tenant have permission to assign the remainder of the lease term to them?   

Meanwhile, it appears you did commit to rent the property to another couple for a September move-in.  Without more information, it is impossible to know whether you have one tenant, two tenants — or none!

If you want to resolve the issue short of a legal dispute, one possible solution would be to ask the current tenant to agree to remain responsible for the lease until September 1st in exchange for your agreement to terminate the lease early.  If they refuse, and if you have a binding lease with the September couple, there is a chance you may be out the August rent — which is a shame, because you were only trying to be helpful.

It is not clear if you live in an area where you are allowed to collect damage deposits, but you will also want to do a walk-through of the property when the current tenants leave, and assess any damage that may have occurred during that lease — however long it turns out to be.
 
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).

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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. 

{ 1 comment… read it below or add one }

Steve July 24, 2012 at 11:24 am

Tenants are going to leave early sometimes (job, marriage, transfer) so as a landlord you should take it as a way to make some extra money.

Put in the lease that they can leave with 30, 60 or 90 days notice (depends on your area) and by paying a early lease termination penalty of one months rent (that must be paid right then or I will not start the 60 day count down). Then everyone knows right up front that they have that option.

When a tenant tells me they are going to be breaking a lease I ask how soon they are planning to move out and if it is before the 60 days are up I will try to find someone to take the place over earlier. If I do find someone I will refund the previous tenants the portion of overlapping rent (which you have to do, no double dipping on rents). I also let the tenants know this before hand. It will get them out sooner, which give me time to get the place cleaned up and showing well so I can raise the rent.

You don’t want them moving out right at 60 days, you will have no time to work on the place and are far more likely to have some vacancy before a new person can move in.

Most landlords dread a tenant leaving early. By me charging a fee it is an excellent pay day for doing something that I would have to do for free if the tenant stayed until the end of their lease.

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