How to Manage an Early Lease Termination

When you have a 12-month lease agreement in place, it’s safe to assume that your residents are staying put for at least a year. But in spite of their best intentions, life sometimes gets in the way and your residents will ask to leave early. Typically, under most contracts they will be on the hook for rent for the remainder of the agreement — but like most things, it’s not all black and white. Here’s how to manage an early lease termination without losing rental income. 

Just as a lease agreement is an essential part of renting out your home, so too is a policy on early termination of the agreement. If you don’t have a termination clause in place, you could be caught out if your residents want to leave earlier than planned. 

If you’re self-managing a rental property, you will want to ensure you have an up-to-date lease agreement that abides by your local state laws and includes a policy for lease termination. A formal lease agreement protects you from losses in the instance of a break-lease by ensuring that your residents remain financially responsible until the property is relet. You will need to either speak to an attorney or anyone you partner with to help manage your property, like Belong or a property management company. 

Regardless of how your property is managed, the residents will need to provide written notice to vacate. They also need to follow the procedures outlined in their signed lease agreement, such as continuing to pay for rent during any vacancy and covering marketing costs. 

As the homeowner, once you have been served notice for a break-lease, you must be seen to take reasonable steps to find a new tenant. That is, you can’t simply wait out the lease agreement while the former resident is still paying rent. The property must be marketed for rent in an effort to find new residents — either by you or whomever is managing the property. 

There are a few instances where these financial penalties don’t apply and only 30-days written notice is required, such as if the resident is called for active military duty or needs to leave to protect themselves from a domestic violence situation. 

4 reasons a tenant has a legal right to break a lease

There are some exceptions under state laws that allow a tenant to terminate a lease agreement early without the same penalties. Check with your local jurisdiction, but for example here are the legal reasons within California where a tenant can end an agreement early:

1. The resident is a victim of domestic violence

In many states (including California and Washington), a victim of domestic violence can provide 30 days written notice to vacate and end their lease early without having to pay rent for the remainder of the agreement. Typically they will need to provide proof of this status (such as a protective order). 

Even if your state laws do not enforce this, it is worth having compassion in these scenarios and consider the safety of your residents. Not allowing them to leave without a financial penalty could force them into an unsafe situation. Not only is this inhumane, there is a real potential for damage to your property or lawsuits if the situation were to escalate. 

2. The resident has been called to start active military duty 

If your resident is part of uniformed services (armed forces, National Guard, NOAA or commissioned corps of the Public Health Service) the War and National Defense Service members Civil Relief Act gives them the right to break a lease under federal law.  

They must still provide you with written notice of their intent to break the lease for military reasons and their tenancy will terminate 30 days after the date that rent is next due, even if it’s prior to their lease expiration. 

3. You have not provided a habitable living space

As the owner, you have a responsibility to your resident to provide a safe and habitable space to enjoy as their home. This isn’t just a nice thing to do, it’s a legal requirement known as “warranty of habitability” that applies to all residential leases. 

If there are issues in the home that violate this right (for example, structural issues or a lack of hot water and heat in winter) and you don’t take measures to rectify it, your resident can leave without being held responsible for further rent. Bear in mind that this is only for serious violations and there is a process that needs to be followed, a resident couldn’t simply move out because their shower stopped working without giving you a reasonable time to respond. 

If your home is with Belong, you never need to worry about habitability. This is because we have an extensive network of vetted maintenance professionals and all residents in our network have access to a 24/7 concierge service, ensuring nothing slips through any troublesome, leaky cracks. 

4. You harass the resident or violate their right to privacy 

State laws vary, but typically you will need to give reasonable notice (around 24 - 48 hours or more) before entering your home while it’s being rented out. If you fail to abide by this or are seen to be harassing the resident in any way (such as turning off utilities, changing locks, or showing up unannounced), they have a right to terminate the lease without penalty. Depending on the nature of the violation, you could also face legal action and your own financial penalty. 

If your home is with Belong, again we handle all communication with residents and abide by local state laws regarding inspections and notices, ensuring that overstepping the mark is never a concern for our homeowners. 

How Belong handles early lease termination on your behalf

When your home is loved with Belong, we will manage all communication with both the former and new residents on your behalf and make sure you’re not left out of pocket in the process. 

When a resident requests to terminate their lease early, they remain responsible for paying the rent until the end of their agreement or until another resident has been placed to take on a new 12-month lease. This means there’s no gap in your cash flow and you can continue to earn guaranteed rent even when a resident needs to leave early. 

When the exiting residents move out, we take care of prepping your home to go back on the rental market, with any repairs and/or cleaning costs deducted from the security deposit. In the case of early lease termination, the resident will also be responsible for the placement fee that homeowners usually pay when marketing their home to new residents. 

Of course, the real estate market is a fickle beast and prices can fluctuate wildly due to changing market conditions. If the rental market value of your home has gone down and we need to consider a price adjustment to attract interest from new residents, any difference in rent will need to be covered by the former residents until the expiry date of their original lease agreement. 

Find out why Belong is the stress-free alternative to property management

When the unexpected happens, you’ll really notice the difference between Belong and a traditional property management company. From 24/7 concierge support for both you and your residents to guaranteed rent and protection against eviction costs, Belong is making renting lovable for everyone. 

Visit our homeowner's page to find out more about how our services are helping people to ditch property management in Seattle, Redmond, Oakland, San Francisco, San Diego, Los Angeles, Tampa, Orlando, Jacksonville, Miami and many more.