Tenants breaking the lease was one of my most common “issues” and seem to occur regularly. The default legal language does not allow for any penalty for breaking a lease beyond holding a tenant to the lease until a replacement has been found.
The Problem:
Landlords, by law, are required to re-list the house and show the house in a good faith effort. I have never lost a day of rent so I was always penalized. It made me very upset that “legal documents” meant so little on the tenant side but I, the landlord, was bound to the document.
The Solution:
Break Lease/Buy-Out Clause
- Both Parties are allowed to break the lease under the following conditions.
- 60 days notice and 2 months Break Lease Fee.
Reason
- Provided sufficient notice to replace tenant.
- Monetary payment pays for the time and effort of the Landlord or the Tenant.
- Applies to both sides creating a balanced lease.
- Clear Cut “Costs” for the both sides.
I highly recommend this buy-out clause because life happens. If either side has to break the lease it becomes “business” and not personal. Below is an “example” wording. As always please check your local and state laws.
Buy-Out Clause:
“This allows either the tenant or the landlord to break the lease without penalty as long as they have provided 60 days’ notice and two months break lease fee (______). 60 days’ notice begins on the day that the fee is received. If the tenant moves out before the end of the 60 days’ notice, the additional days will be accessed as a fee. For military provisions please refer to XVIII.”
Initial ______________ ______________
20
Elizabeth, the way your ‘break lease’ clause reads, it looks like YOU agree to pay the tenant 2 months rent amount if you want to break the lease. Is this the case? Have you ever had to use it?
I’ve heard other landlords offer a ‘pay to leave’ deal (in lieu of a formal eviction) for tenants who are behind in the rent or otherwise undesirable, and it’s usually only a couple of hundred dollars. Maybe those are month-to-month people? What would you do in a situation like that? Do you think your lease clause would apply, or could you get rid of them for less?
Great ideas to mull over. Thanks!
Yes, the break lease clause also allows me to “break” the lease for the same charge if it meets my needs. The point of this is not instead of an eviction but to allow me the same “right” to reclaim my house as my tenants have to break it. I believe that a lease should be neutral not favoring any party. While I have not nor foresee a need to evoke this clause it, the protection is there.
Although, I have not had an issue of non-payment, I plan on pursuing everyone to the fullest extent of the law.
I don’t like the 60 days starting when money is received because it would work against you, the landlord. Would you want to hand a bad tennant that much money up front when you still may have to evict him? Personally, I would be more comfortable with the 60 days starting when a written notice is received. That way you aren’t paying someone until after they are out and you have keys in hand.
I found you from biggerpockets, and I am enjoying your site.
The Break Lease clause was written for the tenants who needed to break the lease for whatever reason. Since I believe a lease should be fair to both sides, I have it allow, “I” the landlord to also break the lease. I personally have never used it. That begin said, I do not plan on using this clause for someone in violation of the lease (non-payment, etc). In that case I would go through the eviction process!
hi
this is so helpful!
i’m a beginning Reluctant Landlord. i have much to learn!
i am in Northern California and wondering how i find out if this break lease clause is legal in my county?
where do i find that out?
the tenants i’m about to rent to have told me they will be purchasing in the area, but i’ve asked them to sign a yearlong lease.
thanks
tracy
Look at your counties website, if the county has particular laws it will be there. You can also trying calling the county and asking them there.
I have a break lease clause that I enforce. This is great protection in case someone wants to leave early. I just remind them at the time of the lease signing, that the lease is for one year. That if they want to break it, here’s the clause to do so. It works out for both sides.
Hi Elizabeth! I’m getting ready to re-write our lease and would love to include a break-lease clause. Do you typically charge 2 months rent as a fee? I would worry if tenants used this option in the middle of the winter that we may have more than 2 months vacancy to find new tenants (a couple years ago we had the property up for rent in oct and it took us until april to rent it out) Just wondering your thoughts on this!
Thanks!! Love the website and its been a big help : )
I charge two months fee and require the notice. I totally understand your feelings about timing. That’s why the fee exists. I have totally had to lower the rent to get it rented out in a bad time!
I want to make sure I’m understanding your break lease clause. For example, Tenant X with monthly rent of $1000, gives you notice on January 1st that they will be vacating at the end of the month (original lease end date is August 30th), They pay January rent on the 1st and February rent on vacate, have they fulfilled your break lease clause? Or do they pay you $3000 on January 1st (Jan rent plus 2-months break lease fee) and they can move-out anytime in January?
What happens if you find a tenant for move-in on February 7th? Do you keep the entire fee?
Thank you. You have lots of great advice.
The break lease clause means you take all the risk. So in this case they would owe you 2k on the day they give notice as the fee and than 60 days of rent no matter when they move out whether day 1 or 60 of the notice. The idea is they are paying got vacate and you are assuming the risk.
Otherwise you tenant would be obligated till you found a new tenant whether Feb 7th or Aug. 29th. That is why many tenants like the break out lease. This way they know exactly what they are obligated to pay!
Thank you for kind words about my blog.
Hi Elizabeth, your site was referred to me through a military fb group. I’m having a hard time figuring out if a buy out clause as you stated above is legal in the state of California. From what I’m reading, it seems like this may be illegal due to the “mitigation of damages” policy where we as landlords would have to make a good faith effort to find a new tenant no matter what the reason for breaking the lease. Wouldn’t this be seen as a form of double dipping? I’d appreciate your input when you have time. Thanks!
Sarah,
I am no lawyer so no legal advice but in my research and understanding its not illegal. From what I can tell and have been told one can have the buy out clause as that is the damages. If the buy out clause doesn’t exist THAN the mitigate of damages policy comes into play to prevent a landlord from just letting a house sit. That’s why all of my leases have the buy out clause, otherwise there is no penalty (can’t add it in later based on current understanding) and I have to make every good faith effort to find a new tenant. Insult to injury is I can’t charge for my time to install a tenant so basically there is no penalty for a tenant breaking the lease.
Thats the short answer. The other professionals I talked to gave me the longer more complicated legal answer but based on our discussions I came to the decision I was fine. Still always research, talk to people and do whats comfortable for you, because at the end of the day I have always been told that court and the judge (aka her mood, her feelings, etc) is the final decision factor.
As always nothing legal, as I am just a crazy landlord 😉 Hope this helps.
This helps, Thanks so much for your time!
Without the buy out clause, if we have a 1 year lease and tenants want to leave 6 months early, what are my legal options? Of course I’d rather they stay but since they won’t (a new job in other area) what should a good guy owner do to be compensated properly for the loss and the time I now need to spend finding a new tenant….mind you my rental is in another state then I am…UGH!
And how on earth do I find or make a good lease so I can add my buy out clause from now on?
Hi Elizabeth,
I’m re-writing my lease and this article is very helpful. I was wondering what you meant by “If the tenant moves out before the end of the 60 days’ notice, the additional days will be accessed as a fee.” Is this simply stating that the landlord can recover possession as soon as the tenant vacates, or do you mean something else.
Thanks!
It means that if the tenant gives 10 days notice they have to pay for the additional 50 days as a fee.
How do you handle the security deposit in this situation? Do they forfeit their deposit and have the 2 months rent due, or do they get their deposit back (as long as everything is in good shape)?
I never touch the security deposit until they move out. This is my protection and fund to use for repairs. The received date of the two months rent is the start date of the 60 days notice.
Hello,
I am in the same boat. tenants want to leave early. Lease isn’t up until July.
Trying to wrap my head around this.
So just to be clear when they give notice, say it is January 1st.
They pay two months rent as the 60 day fee for the break out clause.
So if rent is $1000 per month, the total would be $2000.
Do they still pay rent as well. for January 1st?
Also do they forfeit their deposit?
If the deposit is $1000. Then they are giving you $2000 for the break out clause and when they move out your giving them a $1000 back.
Thank you so much for the advice!
Paula,
My lease the sixty day starts the day the break lease fee is received. So if 60 days or in your example, $2,000 was received Jan 1st, the last day would be Feb 28th. If they want to leave Jan. 31st, than they would owe 3 months as any extra rent is due at time of notice per my lease. I do not touch the security deposit until after they leave. This is my insurance policy they leave the house in good condition.
Hope this helps!
Elizabeth
Hi Elizabeth,
Thanks for your advice and love the blog. I also have some clarifying questions as I am a new landlord. If you wouldn’t mind to help me fill in the details below for each of these scenarios regarding this break lease fee. I’d really appreciate it.
Scenario 1:
Rent is $1000 a month
Fix term Lease Jan 1 2017 – Jan 1 2018 let’s say.
Tenant moves in and gives notice on Apr 1, 2017 that he lost his job and needs to break the lease and needs to leave on June 1, 2017 (so in this case he gives a full 2 months notice).
Please correct me on these number if any of them are wrong:
How much should he pay on April 1, 2017? I think it’s $2000 (for the 2 month break lease fee), $1000 for April’s rent.
How much should he pay in May 1, 2017? I think he just pays May’s rent in this case so another $1000. Or maybe in this case he doesn’t even need to pay if he’s already paid last month’s rent at the initial deposit?
June 1, 2017 – He’s out. Doesn’t need to pay anything more.
Scenario 2:
Same as Scenario 1 but only difference is that he’s telling me on April 1, 2017 that he needs to leave this place in 2 weeks (so doesn’t even give me 60 day notice).
How much should he pay on April 1, 2017? I think he still needs to pay for the 2 month’s break lease fee. Does he then pay for a prorated April’s rent of $500? (so if he already paid last month’s rent at the intitial deposit do I refund him $500 of that? Seems wrong but just want to check). And is there any fee that he should incur from not giving me the 60 day notice? Can I write into the lease to keep his security deposit because he failed to give me that 60 day notice?
Lot’s of questions I apologize, but I really want to make sure I understand how to write this lease agreement up to cover my basis and to make this fair for everyone.
Thanks,
Connie
Connie,
So yes in the first example he would owe you $2000 April 1st. Than $1,000 April, and a $1,000 May. He would have paid his last day May 31st
The second example he would owe $2,000 break lease, 6 weeks due to non-notice (500 + last month rent paid) and than the $500 for the 2 weeks he will be there.
The idea is you always get 4 months “notice” 2 months in time to place another tenants and 2 months for dealing with it. Hope this helps
Blog is great. One very distracting element to your communication is the misuse of the word “than”.
“Than” is used for comparative purposes. This is more expensive THAN that. This coffee is hotter THAN that coffee.
“Then” is used for conveying sequence or consequence:
If you don’t pay the rent THEN you will be required to move.
I went to the gym, THEN to the store.
Don’t mean to sound like a jerk but this is actually distracting and sometimes confuses what you are attempting to say
🙂
Hi Elizabeth,
I have 2 questions:
1. What are your thoughts about a 30-day buy out clause instead of a 60-day clause? I’d feel comfortable if with having just 30 days notice and just one month’s rent break lease fee if my tenant decided to move out. I’m more concerned about wanting to terminate the lease early myself and would like to have the option to give only 30 days notice (and pay one month’s break lease fee), but I worry that’s too little notice for a tenant to have to find another place and move. Do you agree or do you know of landlords using a 30-day buy out clause?
2. What are your reasons for NOT starting the notice when written notice is provided instead of starting when the 2 months break lease fee is paid? Again, I’m thinking more about the scenario where the LL breaks the lease, not the tenant.
Thanks very much!
Hi Elizabeth,
We had this clause in our lease with our previous tenants but it wasn’t clearly in there that the FEE was due at the same time as notice – so they interpreted it as it’s due by move out (we have since added very clear language to the lease!) HOWEVER, they moved out and still haven’t paid the fee ($3,600). My question is – do you sue? What is your follow up? I have their security deposit at 1.5X rent ($3,200) and there wasn’t much damage — so far, only a cleaning fee because they didn’t have the property cleaned. Would love to hear your thoughts.
Thanks!
-Alex
This was great thank you! I recently started into property management since I am a handyman by day and thought it would be a good use of my skills. I have been struggling with the legalities as far as having full understanding of them. Would I need to check with my local government to ensure I can legally ad this clause?