Is Your Tenant Asking You If They Can Break Their Lease? Here Are Your Options and Rights As a Landlord

When a tenant changes his mind about renting from you before he’s moved in, what does that mean for you, the tenant and the rental property? Perhaps the tenant got notice of a job transfer, encountered a family emergency or simply got cold feet about moving into your rental property. No matter what the circumstances, sometimes tenants change their mind about occupying a unit even before they move in. Learn what both of you are legally obligated to do when this unusual situation occurs so you can minimize the financial impact. See: Breaking the Lease as a Tenant – Know Your Rights

Once the rental lease agreement has been signed, you and the tenant have entered into a binding contract, whether the tenant actually occupies the unit. If a tenant changes his mind about moving in, you must treat the notification as his intent to break the lease agreement. Read: What to Do When a Tenant Wants to Break a Lease – Zillow.  

Ask the tenant to provide a written 30-day notice for your records that he will be breaking the lease. Explain to the tenant that he is legally liable for rent for the entire lease agreement; however, you will try to re-rent it as soon as possible as part of the good-faith effort required by most states. The tenant is responsible for paying rent until your property is rented out again, whether he is physically present at the unit or not.

The security deposit (generally equal to two or three month’s rent) is made for situations like this. To compensate you in the event of unpaid rent. Because most landlords require tenants to pay the security deposit at the same time the lease is signed, it can help bridge the income gap between your tenant’s first few months of rent. 

If you have collected the deposit from the tenant, you and the tenant have two options. The first thing you can do is keep it, apply the security deposit toward rent owed until the property is re-rented, and then send the unused portion back to the tenant. The tenant doesn’t pay rent unless the rent owed exceeds the total deposit. This route is risky because it may be difficult to collect or sue for rent from the tenant after the security deposit is used up.

The second option you have as a landlord, is to set it aside and the tenant pays rent each month until the property is rented again. Then, you send the deposit back in full, since there won’t be any damages to the unoccupied unit. This route is safer for you because the tenant has incentive to pay the rent in order to get the security deposit back in full. If the tenant fails, you can deduct rent from the security deposit anyhow. 

When the tenant doesn’t get his deposit refunded immediately or wants to give you an earful when you stand your ground on rent responsibility, he may invoke what is known as a right to rescind. This is referring to a consumer protection law that requires financial lenders to allow borrowers to back out of a loan under certain circumstances after three days.

Unfortunately for the tenant, this right does not relate in any way to lease agreements and rental properties. If the tenant tries to convince you of this policy, go ahead and debunk the notion that there is a right to rescind or cancel a lease agreement within three days. 

When your tenant wants to terminate the lease agreement before occupying the rental property, you can work with him to minimize the financial impact for both of you.

As the landlord, you are entitled to keep the security deposit, and are entitled to collect rent until the unit re-rents. However, it is your duty to minimize the time it takes to re-rent and find a replacement tenant. For further reading, check out: When Your Tenant Tries to Break the Lease.

 

 

2 thoughts on “Is Your Tenant Asking You If They Can Break Their Lease? Here Are Your Options and Rights As a Landlord

  1. Tenants breaking a lease is a common problem. One suggestion I’d like to make to anyone reading this article is that you also ask for not only the first months rent and security deposit, but ALSO the last month’s rent. While yes, this weeds out many prospective tenants, and your property may stay vacant for a while, you will definitely have tenants that you know are 100% reliable. Anyone that can afford to pay all three will be a great tenant, and you’ll know they aren’t living month to month. It may seem absurd, I know, and most people aren’t willing, but if you can afford to wait for the tenant that can afford this, it’s best.

  2. I had a tenant ask to break her lease. I was fine with it. I mean it wasn’t ideal, but I wasn’t pressed on cash at the moment, and she told me that she and her boyfriend broke up (they were on the lease together). I felt for her, and so I told her it would be okay. I think landlords should be more understanding in regards to tenants. Sometimes they really do have to move before the lease term.

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