Lease agreements are invaluable legal contracts that allow both the tenant and the property owner to abide by the rules of the tenancy. It’s a form of assurance that the tenant will pay rent until the expiry of the lease and that the landlord won’t raise the rent.
But sometimes tenants don’t hold part of their bargain. A new job, marital issues, new house, and other reasons can force tenants to break lease agreements. Whenever this happens, it is important to know how you can handle the situation to avoid losses.
As a property owner, it is crucial to know what it means when renters breach tenancy agreements. Unless landlords violate the terms of the contract, a tenant is obligated to the terms of an early termination clause.
Still, under some circumstances, there are valid reasons that allow renters to break a lease. In effect, you can either be legally bound to release tenants without any penalties or be in a legal position to seek compensation. Here are some actionable tasks you can do to prevent or handle a broken lease agreement.
Consider A Lease Termination Clause As A Landlord
Including a lease termination clause in the tenancy agreement is the surest way of mitigating financial costs associated with tenants breaking leases. Such a provision would explain and provide a guideline regarding what should be done when renters terminate contracts early. The clause allows renters to give an early notice; this is typically 30-60 days before the intended day of moving out.
Lease termination for landlords is necessary as it gives you a chance to find new tenants while the departing tenant pays for rent. However, most states, including Utah, require landlords to actively search for new occupants to avoid overburdening the current lessee.
The early termination clause allows you to legally bind the tenant to the terms of breaking a lease. You’ll clearly outline the consequences of breaking the lease before the expiry of the term.
Within this clause, you can introduce a buy-out clause that allows the tenant or you to break the lease. In this case, the individual breaking the lease pays a penalty fee, which is equivalent to no more than three month’s rent – as required by the law. If you go with this option, sometimes it ends up being a costly choice if you can’t find a new tenant quickly.
Typically, you have three options as a landlord when a tenant breaks the lease:
- Subletting – this means allowing the current lessee to sublet the property to another person. When this happens, ensure that the new tenant qualifies as a good tenant. Also, inform the previous renter that the security deposit won’t be available until the end of the original lease.
- Re-Renting – the law requires you to advertise your property as vacant as soon as you receive a notice from the tenant. You can shift marketing costs to the tenant provided that you have clearly indicated that provision in the early termination clause.
- The third option is letting the tenant pay for rent balance for the remaining months. This can work if there are a few months (less than 3 months) to the expiry of the lease. Note that the law requires you to mitigate damages when renters break lease agreements, so deliberately leaving the property idle is downright illegal.
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Demand for an Early Notice
Regardless of the reason that motivates your tenant to move out before the end of the lease term, you can include in the lease agreement the need to provide an early notice. You can give anywhere between 30 to 60 days depending on what works for you.
Can Tenants Break The Lease?
There are a few situations where the tenant can legally break a lease agreement. In Utah, you cannot subject your tenant to the buy-out or early termination clause if:
- He/she is an active military duty
- He/she is a victim of domestic violence
- Your rental unit is considered inhabitable. Ensure that you meet Salt Lake City area health and safety codes.
- You harass or violate your tenant’s privacy. You are required to give a 24-hour notice before entering the property. Also, you cannot change locks, tamper with utilities, remove doors/windows, or do anything that violates the tenant’s rights.
When Breaking a Lease is Unjustifiable
You’re legally allowed to hold the tenant to the terms of the lease in case they provide unjustifiable reasons for breaking the contract. Breaking lease is inexcusable if tenants are:
- Moving to a new house
- Relocating to a new job/school
- Moving in with a spouse
- Moving to be close to family
Terminating a lease agreement can come with unforeseen nightmares. As a property owner, cushion yourself from this by writing a thorough lease agreement containing a legally-binding early termination clause. Another option you can take is to take it off your plate altogether. At Wolfnest, we provide professional property management services that can help you save time and money. We specialize in filling vacant properties, handling tenants, and much more. Start managing properties the Wolfnest way today!
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