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How to (Graciously) Break a Lease

Leases are legal contracts meant to provide financial security for both sides – building owners or property managers on the one hand, and tenants on the other. Sometimes, however, either side may want to terminate the contract.

When demand in the rental market grows, owners and their representatives are more lenient with lease breakers as it gives them an opportunity to rent the property at a higher price point. But even in slow markets, honest on a tenant’s part and extenuating circumstances may lead property owners to relax and bend the rules. This article explores ways to keep both parties satisfied, first from the tenants perspective, and then from the property managers.

When a Tenant Wants Out

The biggest factor in determining a termination request is whether the rental market is strong. “If rents are going up and there’s little inventory, letting them out can offer a landlord or property manager the chance to raise rents,” says real estate attorney Zachary D. Schorr of Schorr Law in Los Angeles.

Some associations require tenants to pay liquidated damages, which is an agreement to terminate the contract in advance, which may not exceed an amount equal to two months’ rent. Or the tenant can give the company permission to re-rent the apartment as soon as the resident provides written notice.

“If the market’s strong, they may have to vacate quickly. If soft, it could take a while and cost them more,” says Francine Bass, director of associate development at Altman Management Co., which owns properties in Michigan and Florida.

Tenants may still have a chance for a graceful exit if they’re honest. “Tenants should explain if they need to move for another job, are sick, or have lost a job and can’t afford to keep paying,” Schorr says.

However, the potential for consequences still loom for many tenants, such as not getting back their entire security deposit, paying for an ad to re-rent the unit, hiring a broker, or having the unit painted or carpeted at their expense.

If a lease break does not go pleasantly, it’s advised that tenants should request a written lease termination letter that says they’re delivering the property back to their landlord to prevent owner or property manager from seeking additional rent or damages later, for whatever reason, Schorr says. “The lease termination trigger the landlord’s duty to mitigate and find a new tenant, then the value of getting the tenant out as expeditiously as possible is usually more important than a drawn-out trial,” Schorr says.

When a Property Manager or Landlord Wants to Terminate Lease

The best way to terminate a lease is by having a termination provision, an agreement that lets your buy out the tenant’s interest for a specified dollar amount upon giving a preset amount of notice, says Schorr.

“Perhaps you give your tenants 30 to 60 days, return their security deposit, and cover their moving expenses. There doesn’t have to be a reason for doing so if this has been written into the lease. And if tenants don’t move, you have the right to begin eviction proceedings,” he says.

Even when parties reach agreement, it is still in everyone’s best interest to sign an early lease termination agreement or release and surrender agreement against all claims, protecting against future problems, says real estate lawyer John Schepisi of Schepisi & McLaughlin in Englewood Cliffs, New Jersey.

Schorr adds, “You don’t want tenants claiming they were improperly evicted or discriminated against, and coming back to sue for retaliatory eviction and seeking their attorney’s fees.” Tenants have become incredibly savvy by causing all sorts of stays and delays by filing for bankruptcy and asking for a jury trial. “In the end you may be successful, but you’ve extended the time of the rental and often without monthly rent,” Schorr says.

In addition, Schorr recommends not to take possession of a property without the tenant’s permission or a court order. This is called self-help eviction. “You risk being held responsible of depriving them of the use of the premises. They may file damages against you, even if they’ve stopped paying rent,” he says.

If a tenant stops paying rent, eviction processes can begin within three days following a written warning. Some states take longer than others, with evictions in California sometimes taking as long as four to six weeks. “Out-of-court resolution is always best,” Schorr says.

Having a property management company that has streamlined processes for lease and contract management is essential for the smooth operation of any rental process. See how our management processes can benefit your association.

 

 

 

 

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