Summary:
If you want to break a lease as a landlord, it’s important to consider local housing laws and existing lease terms. Reasons for early termination may include: rent non-payment, lease violations, property sale, or extensive repairs. Landlords must follow legal processes, such as providing written notices with specific reasons and grace periods. Tenants usually have the right to contest lease terminations and can sometimes even take counter legal action. Communication, record-keeping, and professional conduct are crucial throughout the process.
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The sign says "Bridge Out: Do Not Cross.” If you ignore it and smash on the gas, you can't be surprised if your car gets wrecked. Similarly, If you ignore the terms of your lease agreement and kick a tenant to the curb incorrectly, it could mean total destruction for your independent property business.
According to legal site Justia, wrongfully kicked out tenants can sue not only for their legal right to stay, but also for monetary . Common damages include payments for things like property damage, retaliation, housing discrimination, court fees, and more. These crushing payouts can add up for independent landlords and wreck any chance of profits––not to mention making your insurance premiums skyrocket.
That's why it's incredibly important to help prevent early lease terminations by placing great tenants from the start. One of the best ways to prevent things like troublesome renters and non-payment is thorough renter background checks. This includes getting professional reports through a reputable service like SmartMove®.
To be successful, you need to know tenants will pay the rent every month and on time and respect your property. However, even the most carefully plotted plans can go off course eventually. If you do need to terminate a rental agreement early, it's important to know how to do it right.
The following article contains what you need to know about breaking leases to help you confidently tackle any twists and turns that come your way.
What Is a Lease And Why Is It Important
There is a difference between a lease and a rental agreement. However, for the purpose of this article, the terms will be used interchangeably. A lease is a legally binding contract between a landlord and tenant that lays out the tenancy agreements and obligations between both.
While lease details can vary significantly, there are many common lease terms that are included in most agreements. These include things like:
- Rent amount, due date, and penalties for late payments
- Accepted payment method
- Occupancy limits
- Whether or not pets are allowed
- Security deposit information
- Maintenance responsibilities, such as lawn care
- House rules, such as quiet hours, parking information, and more
In addition, landlords have some freedom to add in custom lease terms. However, there are laws that limit what exactly can be in a rental agreement. These allowances vary by jurisdiction so it's crucial to always research laws in your area and consult with a knowledgeable attorney, if needed.
It's almost important to remember that a lease goes both ways. Tenants should keep their end of the agreement. Likewise, it's essential to adhere to your own terms. For example, rental agreements also lay out the terms and conditions under which you can enter or inspect the property and how much notice needs to be provided.
Straying from any lease term––including breaking a lease early––could get you in trouble.
When a Landlord Can Break a Lease
Renting out property comes with its fair share of risks. Unfortunately, while many threats can be reduced with high quality tenant screening, sometimes a landlord's worst fears come true. The tenants refuse to pay rent. They trash the place or start selling drugs from the porch.
It makes sense you want destructive tenants out ASAP. Afterall, you don't want to be on the hook for expensive damages that can cause costly extended vacancies. However, before you break a lease or try to kick anyone out, there are several things you should know.
First, remember that housing laws and regulations vary greatly depending on your location. You may have to do some specific research and contact qualified counsel to learn what you're legally allowed to do and when.
Next, in most cases, both landlords and tenants are required to follow the terms of the lease agreement––no matter what. That said, there are times when landlords can terminate leases before they expire. Usually, this happens when a tenant does something really wrong.
Some examples of when a landlord may be able to break a lease early include:
1. Rent Non-Payment
Some tenants make honest mistakes and may forget to pay for a day or two. Others may never pay you again, despite several reminders and months of free housing. If someone stops paying rent completely, you might have grounds to terminate the lease early.
Before that happens, there are several things you can try to prevent rent-nonpayment. Chief among these strategies is rigorous financial screening. To make money and keep your business alive, you need to have tenants who pay you. For that, you need to understand their financial situation before they move in.
Financial Information to Verify Before Signing a Lease:
- Verify Income. It's your job to find out how much money your tenant makes. Then you can see if they have a good rent to income ratio.
- Income Insights. Helpverify your rental applicant's real-world income matches what they claim on their rental application with Income Insights, an exclusive, data-driven SmartMove tool.
- Get a tenant credit report. Knowing about a potential renter's finances, including payment history, outstanding debts, and creditworthiness can help you understand if they habitually pay bills on time and meet their financial obligations.
Pro Tip:
Credit scores are made primarily for lending scenarios, so they're not always helpful for landlords. Fortunately, ResidentScore is designed specifically for renters and landlords and predicts a potential tenant's ability to pay the rent better than a traditional credit score.
When working with lease violations, it's absolutely critical to keep excellent records. Document all exchanges with tenants. Keep copies of your lease, conversations you have with renters, registered letters, screenshots of texts, and more. If you go to court, you may need these documents to prove you have your tenant fair warning about the violations and opportunities to make it right.
Pro Tip: The most common predictor of a future eviction is a past eviction. Check to see if your rental applicant has a history of rocky behavior with a previous eviction check. Also, don't forget to do landlord reference checks to see how they behaved in the past.
3. Sale of the Property
Many landlords wonder what happens to a lease if you sell the property. Can the renter stay Does the rental agreement automatically end The short answer is: it depends.
According to law firm Stone Crosby P.C. explains that the sale of a rental property sometimes results in breaking a lease and other times not. Like many rental situations, it often comes down to the specific lease terms.
In some cases, a new buyer might inherit the lease on a sold house. In other cases, a lease may have a clause that allows for either party to terminate the lease for any reason with a reasonable (usually 60 day) notice.
To help make things clear, consider adding a clause about what happens if the property is sold into your rental agreement ahead of time. Remember to consult with qualified legal counsel if you have any questions.
4. Extensive Repairs or Improvements
If you have extensive repairs that require total, extended access to the property, you may be able to terminate your lease early, according to the American Apartment Owners Association.
This is the case especially if the repairs will violate the implied warranty of habitability or make the place unlivable, such as turning the water off for a long time.
Steps to Break a Lease as a Landlord
A lease is a legally binding document, so it's not always simple to unravel. According to legal site NOLO, landlords are generally required to follow a specific legal process before terminating a lease early.
The exact steps and process varies from state to state. In general, to terminate a lease early, landlords must:
- Provide a written notice according to your state's requirements
- Explain the reason for the notice and if there is any way to remedy the situation
- Provide a grace period for resolution/move out, typically 20-60 days
According to the same NOLO article, there are three types of notices you might provide a tenant in this situation:
- Pay or quit: In the case of rent-nonpayment, this notice informs the tenant they either needs to pay rent by a certain date or leave
- Cure or quit: For this notice, the tenant either needs to right the wrong or leave by a certain date. For example:
- Unauthorized roommates must move out (one of many common rental scams)
- They must get rid of an unauthorized pet
- They must stop renting the place on AirBnb
- Unconditional quit: Here, the tenant needs to leave by a certain date and can't do anything to stop it.
According to the American Apartment Owners Association an "unconditional quit” is usually just reserved for very serious transgressions. One example might be conducting illegal activity on site, such as drug dealing.
Tenant Rights When a Landlord Breaks Lease
On the other side of the coin, tenants also have rights when you want to break the lease early. In general, tenants are able to contest the early termination of lease and potentially take you to court if it's not justified.
Depending on the situation, renters may have the right to sue you for damages, a partial refund of previously rent paid, or the right to stay in the unit until the end of the original lease term.
Pro Tip:
Keep necessary rental documents in good order, communicate professionally, and keep records of all communication with your tenants.
According to NOLO, Some examples of when a tenant may object to the lease termination or eviction suit, include:
- You acted improperly
- You didn't give sufficient notice or the correct notice
- You are accused of harassment or discrimination
- You did not provide the tenant ample time to correct the wrong
- You've failed to keep the premises habitable or well-maintained
- You handled their personal property incorrectly or damaged it
Pro Tip:
Staying organized is key and can help you in court. Keep your necessary rental documents in good order, communicate professionally, and keep records of all communication with your tenants.
What Happens After You Terminate a Lease Early
If a tenant violates the terms of the lease or you want to terminate the lease early, there are a few things that might happen. Once you provide a lease termination notice, the tenants can react in a few different ways:
- Accept your terms and make necessary changes by the deadline
- Decide not to meet your demands and move-out
- Ignore the notice and stay (potentially becoming a squatter)
- Actively contest the lease termination and take legal action against you
Even though the outcome may make you frustrated or angry, it's very important to remain professional and always do things by the book. Maintain effective, level-headed communication with tenants and keep good records. After the lease is terminated, you can work on eviction proceedings, if needed. Depending on the outcome, you may need legal counsel for additional assistance.
Pro Tip:
Tenant turnover can be a stressful, expensive experience for independent landlords. Check out these tips on how to avoid tenant turnover most effectively.
Help Stop Broken Leases Before They Happen With Tenant Screening through SmartMove
If someone has 85 previous speeding tickets they're probably not slowing down anytime soon. Similarly, if someone has a history of hazardous financial and rental behavior, there's a good chance it will continue in your property. Help reduce the risk of terminating leases early with extra-fast, online tenant screening through SmartMove.
Get to know who's behind the wheel. A criminal records check helps you reveal any previous run-ins with the law or relevant crimes that could put your neighbors, other tenants, or property at risk. Meanwhile, a previous eviction report helps you see if they have any troublesome rental patterns that might continue in your unit.
Is a rental applicant's financial history marred with disastrous potholes Gain insight into their financial track record through a tenant credit check. With the added advantage of ResidentScore, you can better predict their ability to pay rent on time better than a traditional credit score alone. Add in Income Insights to help confirm if the reported salary aligns with reality or if additional verification is necessary.
Backed by TransUnion, a credit agency with decades of data expertise, all FCRA-compliant screening reports help inspire confidence, so you can make better-informed leasing decisions.
Help stop early lease terminations before they happen. Steer clear of potential red flags more often with flexible, affordable tenant screening through SmartMove.
SmartMove,
Great Reports. Great Convenience. Great Tenants
Know your applicant.
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The information posted to this blog was accurate at the time it was initially published. We do not continue to guarantee the accuracy or completeness of the information provided. The information contained in the TransUnion Rental Screening Services, Inc. blog is provided for educational purposes only and does not constitute legal or financial advice. You should consult your own attorney or financial adviser regarding your particular situation. For complete details of any product mentioned, visit www.transunion.com. This site is governed by the TransUnion Rental Screening Privacy Policy Privacy Notice located at TransUnion Rental Screening Solutions, Inc. Privacy Notice | TransUnion.
