Does your tenant want to break the lease? Have you received a break lease request?
Turnover for any landlord is scary! Many more experienced landlords like myself specifically schedule expiring leases around major life happenings to prevent as little stress as possible.
If your life is anything like mine this is when craziness strikes best, like two houses coming up for lease renewal the day after your husband left for deployment and the day before you started a very stressful new job. Unfortunately, we cannot control others.
We can only control ourselves and the situation. That is why I have a BREAK LEASE CLAUSE in my lease. Although I cannot control the situation, I can at least make sure that I am rewarded for having to deal with the stress.
Breaking a Lease Without a Break Lease Clause
Per federal and state law, if you do not have a break lease clause in your lease the tenant is required to cover your losses till you find another tenant. However, you are required to show good faith in finding a replacement — no matter what is going on in your life. You are also not allowed to charge them beyond when the tenant leaves and the new tenant arrives. Doing so is called double dipping and is illegal.
Pros:
- Can Charge Till You Have A Replacement Tenant
Cons:
- Can Only Charge for your expenses, landlord time is not an expense
- If you have no loss of time, you can recoup no losses
- You have to show the house right away, no matter what is going on in your life
- Once tenants leave the house, I have heard of numerous cases where they stop paying the second rent
Solution
Personally for me this was awful. My houses are well priced, are great homes, and well kept. I never had a problem re-listing or renting my house out. Honestly, I have never lost a day of rent during re-rental. While this is normally a great thing, it drove me crazy that I was required to keep my end of the bargain always. While the tenant could break it at any point. That seemed really unfair. It also was super stressful and annoying to have to pay for turnover costs (plane travel, etc) during a non-turnover time.
Breaking a Lease With a Break Lease Clause
I started out my career working for a company that owned six apartment complexes. They had this clause in their lease called a break lease or my rename, Buy Out Clause. It stated below:
Break Lease Clause consisted of 60 days notice and 2 months “buy out” or break lease fee. That any time less than 60 days became a fee. This money is due upon notice, 60 days doesn’t start till the buy out fee has been provided with a MOVE OUT DATE. If the date is less than 60 days, that amount of time is scheduled into the fee. All of this begins BEFORE their 60 days start.
I DO NOT allow security deposit to be used. Remember that the security deposit is for repairs to your house after the tenants leave. The break lease clause is your payout for dealing with the hassle.
Pros:
- Termination stress becomes way to make money
- Get all your money before the tenants move out
- Can rerent at your time line
- Business not personal
Cons:
- Can not charge the tenants if the house doesn’t rerent quickly
We are very careful to try to make this a business while still treating others with kindness and respect. Unfortuantly at the end of the day the only person taking care of yourself is yourself. I have had numerous reasons why people were breaking my lease.
What I absolutely love about the break lease clause is that there is no reason for a discussion. I don’t have to worry about a decision or what to do. Per Fair Housing, I have to treat everyone the same and equally. Therefore, if I discard one part of my lease then I have to do that for everyone.
Since everyone signs the lease in their own handwriting it has prevented the problem of “I didn’t know.” So this way I am not the bad guy. I am no longer upset over having to deal with something because I am being paid for my time.
6
I’m really not sure I understand the Break-lease clause. If they have a 12 mo lease and 4 mo into the lease tell you they are moving in 60 days, they have to pay 2 mo. rent? or if they give you less than 60 days they pay the fee?
Yes they have to pay 2 months break lease fee and give 60 days notice. The notice doesn’t start till the break lease fee is received. If they have to move quicker than the 60 days those day become part of the fee.
I understand the 60 days notice and 2 months rent but I don’t understand what you mean by if they have to move before the 60 days then those days become part of the fee. Do they end up paying you more because they are leaving earlier that 60 days or is the property just available sooner.
Yes if the tenants decide to move out before the 60 days is up they have to pay the difference as a fee.
what is the difference as a fee if they give lets say only a 28 day notice to move out before the one year lease is up? what do you do in this situation? thanks,
Linda,
Without knowing all the details it is hard to know the answer. My tenants have to give 60 days notice. So if the notice was given they would just be responsible for 28 days of rent. If they had signed a new lease, they would be held accountable for the break lease amount.
I would like to know the breakdown of what you charge exactly for the example I asked about let’s say they only give you 28 days notice and not 60 days notice? please. thanks,
Linda,
In this case one would owe 32 days of rent, and the 2 months break lease fee. So it would be a total of 3 months 2 days of rent to get out of the lease.