What happens if a tenant wants to break a lease before moving in?
Life happens, but what happens if a tenant wants to break an already in place lease before moving in? This is an unfortunate situation, but one that can be handled legally and professionally.
Circumstances change in life. Perhaps your new tenant has to move out of state for a job, or maybe they had an emergency that is preventing them from being able to move forward with the lease. Regardless of the reason, a lease is a law-binding contract and therefore must be dealt as such.
A tenant cannot just walk away from a lease, so it’s important for both parties to find a reasonable solution. Keep in mind, there are certain legal situations that allow a tenant to break a lease, but we won’t go into detail here about those specific situations. For the most part, under normal unforeseen circumstances, like a family emergency, new job, cold feet, etc. the tenant has no legal bounds to walk away from a lease without being responsible for the entire lease.
Luckily, this is where hiring Ziprent comes into play. We understand these situations, the law, and know exactly how to tackle it head on to make sure there are no significant financial losses for our owners and the property doesn’t just continue to sit there vacant.
Best Practice: Document Everything
This is a general rule of thumb for any business or professional dealings, but is incredibly critical. Have a file with all emails, lease documents, notices, termination letters, etc. If you have a phone call with the tenant, follow up in an email summarizing the conversation. It is important that you have record of any and all conversations surrounding the lease.
Once a lease is signed, both parties (tenant and landlord) have entered into a legally binding contract, where all parties must abide to the provisions set forth in that document. That means the tenant is still responsible for the entirety of the lease, even if they never occupied it before changing their mind.
Any solution must: * Be legal * Limit financial impact * Be professional * Be in writing
To get the process started, the tenant must speak with the landlord about their situation. Most of the time, if the tenant is flexible and amicable, the landlord will be willing to find a solution that works for both parties. The tenant should first write a letter with a 30-day notice stating they will be leaving the property. The tenant, per the lease, should then be told in writing again by the landlord, that they are still responsible for the rent through the term the of the lease. At this point, both parties should work to find a replacement tenant as part of the ‘Good Faith’ clause held by most states and in most real estate contracts. As soon as an acceptable tenant is found, and a new lease is signed, the previous tenant is no longer eligible for the remainder of the rent and can relieve themselves of any further financial burden.
During the period that the landlord and tenant are finding an acceptable new tenant, the tenant breaking the lease must continue to pay rent each month.
If the tenant has stopped paying rent, that is where the security deposit comes into play. Unfortunately, many security deposits only cover one month and/or a portion of the month, so you need to be prepared to take legal action IF you are not receiving what’s owed in the contract.
If the tenant does pay the rent and/or the either party is unable to find a suitable new tenant by move-in date, the landlord may reserve the right to hold the security deposit in full. However, how each situation is handled varies from circumstance to circumstance. A good property manager will always try to work with the tenant, while establishing a course of action to protect the landlord, but also help minimize the financial impact on both sides.
Please Note: Unlike a real estate sales transaction, there is no Right to Rescind within 3 days. This exists with other real estate contracts, but does not apply to residential leases.
When a tenant tries to break a lease, it can seem like a major bump in the road, but it doesn’t have to be. By keeping all parties aware of the process, the provisions in the lease and the possible solutions, Ziprent can easily move past these hiccups and find great new tenants for their properties.