The Landlord Lens - Lease Breaking Myths

Episode Date: January 14, 2024

Breaking a lease can be a stressful situation for both tenants and landlords. Tenants worry about the financial implications and potential damage to their credit score, while landlords are concerned about finding a replacement tenant and avoiding financial losses. In this week's episode of Be A Better Landlord, we'll explore common lease-breaking myths and provide tips for navigating early termination from both the tenant and landlord perspective.

I'm Jonathan, this is Krista, and we're here to help you be a better landlord. Okay, Krista, we get a lot of questions about lease breaking. And lease breaking, we should be clear up top, is different from evictions. How so? Yeah, so an eviction is going to go through the courts, especially a completed eviction. You are filing something with your local court system. There is a record of it, and usually that follows the tenant throughout their rental history for at least seven years, depending on your state. A lease break is something.

that could be enacted on either side and it's not guaranteed to be on their permanent record in the same way. Okay so and if people want more information about evictions we've got several videos which we'll link down below so check those out if you're interested but getting to lease breaking we're here to tackle some myths. That we are. Let's tackle those lease break myths so looking at the tenant side what are some common myths about the tenants wanting to break a lease? Ooh I would say first and foremost there's the idea that tenants are always penalized if they're breaking a lease. That's not true. In fact, there are a variety of

situations in which a tenant can and should break a lease without being penalized. For example, if you have a tenant who is an active duty service member and they get orders to go relocate for over 30 days, then at that point they're allowed to break the lease. It is covered under a law. And this is really important because they don't have the choice to not obey orders. So they are required to give you at least 30 to 60 days. Notice, depending on, on where you live. They'll provide that notice to you, have an effective end date, and then, of course, move out. And they cannot be penalized. You can't charge them for the rent that you'd be losing out on or anything of that nature. What I recommend is as soon as you get such a notice, you start

trying to find a new tenant. However, you are allowed to ask for proof. You get a copy of their orders. You could get a copy of their deployment, XYZ, just to make sure it's on the up enough. A similar situation in which a tenant can break a lease without violation is, of course, if the tenant is a victim of domestic violence. So domestic violence survivors can end a lease. Usually they have to give at minimum 30 days notice, usually written. In some states, that's an even longer window 30 to 60 to 90 days notice. So be aware of what the laws are in your state. This is a situation in which I would really, really preach empathy above all else because they are leaving for their own safety, for the safety of their dependents, et cetera. You are as a landlord allowed to ask for proof.

Tread carefully. Tread with empathy. Be very thoughtful as you move through that kind of situation. Another third situation in which a tenant could break the lease is, of course, if there's something illegal with your rental, that can take a lot of different forms. You know, whether it's the dead of winter and they have no heat, they've been reaching out to you to try and get the heat turned on and it's not working. Maybe you are renting out a property that's actually zoned for industrial use and not a residential living space.

They could break that. And of course, if you failed to make a property, specific disclosures that are required in your state, like a lead paint disclosure for houses that are built before 1978, they can break the lease. You might also get a fee. So make sure you're providing all of your required disclosures and be familiar with the situations in which a tenant can break the lease without penalty. Yeah. So in all of these, you mentioned that the requirements can vary a lot state by state. That's something we say often on this show and on our channel. The laws vary quite a bit. So how can people make sure they know their laws?

Ooh, so we have a resource that is at least a good starting point to understand some of your landlord-tenant laws specific to where your rental is located. We will provide a resource in the bio down below. But beyond that, I would specifically Google the phrase, your city name, wherever the rental is located. Landlord tenant rights, tenant breaking lease. Maybe throw in a dot-gov if you're feeling a little cheeky. That will get you to a government website where if you have any specific questions, there should be people you can reach out to. But also, you should be able to see the rules and regulations for how much notice people are required to give on both sides of the fence, whether you're breaking the lease as a landlord or they are breaking the lease. So if a tenant is breaking their lease, what happens with the security deposit?

Ooh, so this is pretty tricky. If you don't have a specific clause in your lease agreement regarding early termination that spells out something relating to the security deposit, you would treat it as you would any other security deposit. That means you can't keep it just because they're breaking the lease early for whatever months of rent that you are in. not getting paid, it can only be used for non-payment of rent, meaning months that they've stayed there without paying rent in the past. Okay. Or, of course, damage to the property. So you would go in, you would itemize any damage, provide receipts, make sure you're sending them that information, and that's really the only case in which you can keep their security deposit. Unless, of course, as I mentioned, you have that specifically, which in your lease from the get-go. So in some cases,

you would actually be giving a pro-rated security deposit back, depending on how long they were there? it depends so if so if they have a let's say a thousand dollar security deposit and there are three months left of their lease you can't take that and keep it unless that language is in the lease saying hey you forfeit that amount of money usually from what i've seen landlords require them to forfeit the entire amount it's not prorated based on how long they have left in the lease agreement itself it's more of an all or nothing situation but again do check your local laws because the actually of withholding a security deposit, it can get dicey. So before you put that in writing, check with either your local government site, talk with a real estate attorney, make sure it's on the up and up. Okay, so we covered myths about tenants breaking a lease. What about when landlords break a lease? What are some myths there? Yeah, so sometimes people don't think that landlords would ever want to break a lease. You know, you have a contracted agreement, you're getting monthly revenue, why would I ever break the lease? Well, there are a lot of different reasons. Maybe the property

requires extreme repairs and you don't have the money for it, so you'd rather sell off that asset. Maybe you've just gotten to a point where you don't want this rental property in your portfolio for whatever reason. You want to sell that. Or as we've seen in the news, there are stories of landlords coming back home and wanting to live in the residence where their renters have been for whatever period of time. That is well within your right as a landlord. However, you have to make sure that you're giving your tenant the proper notice and any kind of tools that you can help out with since you are effectively displacing them are well appreciated, although not always legally required. So I talked to one of our users recently who is a landlord. I think he has six properties.

He's also a real estate agent. And he has a clause in place with each of his tenants where if they want to move out to go purchase property, he'll give back their entire security deposit if they use him as a real estate agent. Smite? Yeah. So there are lots of ways that landlords can be creative, especially if these tenants have been great long-term tenants for them. what are some other ways that landlords can help provide people, you know, a smoother move out process? Yeah, you know, especially for people who are moving out to purchase their own property, it's a great way to kind of cap off your relationship on a good note while benefiting from their change in life. So that can take a variety of forms, whether that is some kind of affiliate partnership,

maybe with an agent if you're not a real estate agent yourself, or even potentially a mortgage lender. depends on the rules in your specific state. So please, please, please check your local state laws. You do not want to get in trouble if this is not something you can be doing. But if you set up a referral system and you have a contract in place where, you know, I tell you to go check out my lender, Mike, and Mike will give me a cut of whatever, you know, comes his way or maybe a $50 gift card to outback Steakhouse.

Whatever it is, there's ways for me to benefit as a landlord, even though it's a change. So again, do your due diligence, look up your law. and then get creative because the nice thing is if you do manage to pass your tenant to, let's say, a lender or a real estate agent, you're also preserving that relationship with the former tenant. They might refer you to some of their friends who need place to live. And that is truly a win-win situation. Yeah, that's something that the long-term landlords understand is that referrals, especially from an awesome tenant, they're probably going to refer another awesome tenant. So it's always a good idea to keep those relationships in place. Absolutely. In order to best do that,

you should have some kind of language in your lease that dictates everything about an early termination for both sides. Do you want to guess some of the things you might want to include in such a clause? I guess the time frame, how much notice they'll have to give you before they terminate a lease, maybe outlining some of the common situations that would lead to a lease termination. Am I on the right track? You are A for effort. Okay. No, you are spot on.

That is exactly the kind of information that you'd want to include in this clause. Really treat it as though you are as impartial as possible. So outline the conditions why you might, as a landlord, break the lease, the amount of notice you will provide them if you are going to give them any kind of monetary assistance. Especially, let's say if you're selling the property, it might be kind to help them with a little bit of money to move out since you are going to have a net benefit from the sale of the property. That part's not required. But again, it's something to consider if you want to really hit home on those word of mouth referrals or otherwise preserve your relationship in kind of a rocky time since you are taking housing away. Additionally, you want to make sure that they understand situations in which they can break the lease. And if you want to get really fancy, you should include steps that they can take to circumvent a lease break.

You know, remind them in this clause that you want to be contacted if they have issues, let's say, with a property manager who's harassing them. or if there are maintenance issues, you know, address all of this in the clause so that they know when to come to you and how they can get these issues resolved before it becomes a lease break situation. However, that's not always going to work. So tell them how much notice they have to give you, any kind of documentation you would require. And again, encourage them to communicate with you at every step of the way. The leases are another thing that come up in a lot of these episodes that we do. And the reason is that should be your fallback for everything. Yes.

So making sure that things are outlined in there, even if you hope that a tenant won't break a lease early, it's always good to have that stuff outlined. Absolutely. It protects you. It protects them. And it makes it very clear the steps both of you have to take in order to move through the situation, which is great. Because sometimes these situations pop up because, you know, maybe someone is sick or there's some kind of traumatic event. And having clearly outlined instructions and a timeline eases the burden on both sides. One myth that I've seen before is that landlords can move out a tenant if they're moving in a family member. Is that true? That is usually not true. So there are some states, I believe Oregon is one of them, where you can have that kind of language in the lease to say, hey, if I have a family member or a friend who needs to move in, I will give you X amount of notice and they will then take over the property.

But by and large, no. You need to let your tenants finish out their lease term. At that point, you could choose to not renew it and then move in your family member. However, if they need immediate assistance, I would look for other ways to help them out. And that's different than if you were breaking a lease so that you yourself could move in, right? Yes, because as the owner of the property, you have different rights to that property than a third party who would be kind of coming in second to the lease agreement you have existing. Great. That makes sense. Okay. Well, thanks for talking through myths around lease breaks.

If you out there have any more questions we didn't cover, leave them in the comments below. Don't forget to subscribe. TurboTenant is the all-in-one platform for landlords to manage their rental properties. From vacancy to tenancy, we have you covered with industry-leading tools and expert advice. Landlord better from anywhere for free at turbotenant.com.