What Landlords Need to Know About Early Lease Termination
December 2, 2023
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Early Lease Termination
No landlord wants to deal with early lease termination. An uneventful tenancy with timely rent payments and few issues is ideal.
However, that won’t always be the way things go. Sometimes, a tenant may need to terminate a lease early. Sometimes you may need to terminate a lease early.
It’s important to know as much as possible about these potential situations if they arise. You don’t want to figure these things out as you go. That could be costly, in terms of money and time.
Let’s look at what you need to know about early termination of lease agreements to handle unfortunate situations like these.
Can You Terminate a Lease Early?
First things first, are you even allowed to terminate a lease? Yes, but you always need good reason. Outside of a tenant violating a lease term, your only reasonable justifications must be explained and agreed upon in the lease.
For instance, you cannot show up at your tenant’s residence one day because you decided to move in. This is something you must detail in the lease if you want that option. As you’ll continue to see throughout this article, a clear and concise lease is crucial to protect yourself and establish fair expectations for tenants.
Reasons You May Terminate a Lease Early
So now that we know more about terminating a lease from the tenant side, what are some common reasons a landlord might take this action?
Note: Be sure to read up on state and local laws in your area. Those obviously outweigh anything written below if your state or local laws contradict these typical reasons.
Poor Tenant Behavior
Assuming your lease has standard lease terms in it, tenant behavior like unapproved roommates, restricted pets, subletting without permission, and infliction of property damage all give you the right to terminate a lease early. If a tenant is breaking the terms of the lease, you should issue a warning (unless they’re doing something illegal, etc.) and proceed to eviction if they continue to disregard your warning.
You can typically terminate a lease to sell your property. You’ll have to decide if the tenants can remain during the sales process, though. Whatever you decide, give your tenants the required notice and keep them updated on the situation.
It’s your responsibility to keep your rental livable and safely maintained at all times.
That said, if you include a clause for terminating the lease early, specify the terms for breaking the lease early and a time frame. For example, if you believe you might sell the property or need a potential renovation, put it in the lease that you may break the lease with 30 days’ notice. Be sure to have your lease reviewed by a lawyer familiar with your state laws, particularly if you add clauses like this one.
Additionally, ensure your tenant understands this clause. Don’t try to sneak it in or try to slide it in with legal jargon. You want your tenants to know there is a possibility you may terminate the lease early before they make a final choice.
Your Own Move
What if you want to move into your rental? Once again, you can do this only if you write it into the lease agreement. Make your tenant aware of this possibility, though.
Can Your Tenant Terminate A Lease Early?
What about your tenant? Can they terminate a lease early? Again, the answer is yes, but only with reasonable cause. And the same note about state and local laws applies.
Let’s look at some common reasons for early termination of lease agreement by a tenant and whether you’re obligated to let them.
This is one of the more unfortunate and common causes of early lease termination. A lease clause regarding financial hardship was less common in the past than it is now. However, some state and local laws might require you to work with a tenant regardless of lease clauses.
If the lease doesn’t include a financial hardship clause, and your tenant is a good tenant, you should hear them out and try to work with them. Furthermore, adding a cosigner or figuring out an alternative payment schedule may be options that help them stay in the rental.
Active Military Duty
This is one of the few instances where a tenant can legally break a lease early without penalty. The Servicemembers Civil Relief Act protects servicemembers from penalties if orders direct them to move.
Your tenant still needs to follow guidelines, though. They need to notify you in writing 30 days or more before vacating the property. They also need to provide proof of their relocation orders.
What if your tenant gets a new job in a different state? Well, you’re not obligated to allow early lease termination in this situation.
Subletting is a solution that many landlords go with in these circumstances. This can be a win-win for tenants and landlords (if done carefully).
A tenant can break a lease early without penalty if they’re victims of domestic violence in most states. Technically speaking, they need to provide over 30 day’s notice before breaking the lease, and they only need to pay rent until that date.
There are also other reasons a tenant may try to terminate a lease early. For instance, if you consistently enter the premises without at least 24 hours’ notice (even for something like a repair), they can apply for a court order to break the lease.
It’s important to be proactive as a landlord. By taking the actions listed below, you’ll put yourself in a better position to avoid early termination or be more prepared for it if it occurs:
Screen Tenants Thoroughly
No need to reinvent the wheel here. Screening every tenant properly is the first defense against early lease termination. It won’t prevent it every time, but it will boost your chances of avoiding this situation.
Include Early Termination Clauses in Leases
Whether it’s you initiating the early termination or a tenant, including early termination clauses in your leases is vital. Elements in these clauses should involve details like:
- Notice periods
- Early termination fees
- Written notice of termination expectations
- Explanation of cases where early termination is allowable
Consider a Buyout Option
A buyout option gives a tenant the option to pay part of the remaining rent to terminate their lease early. The typical charge is two to three months’ rent.
Emphasize the Early Termination Clauses
As we mentioned earlier, if you include language about how you can move into your rental with notice, be sure to emphasize what this means for a potential renter. It’s better for everyone involved if you highlight this beforehand.
Although local and state laws may vary when it comes to early termination of leases, it’s important to understand as much as you can about this possibility.
The more you know, the better equipped you are to handle this situation should it arise.