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by Robert Cain

Q: We had a tenant ask us to let him out of a lease. We don’t normally do that. Any suggestions?

A:These are case-by-case decisions. There are a number of considerations.

Why does the tenant want out?

1. If he can’t afford the rent anymore, then you are kind of stuck. In that case, he is being up front with you and doesn’t want an eviction on his record. Probably the best bet there would be to just go ahead and cancel the lease. You might want to keep the security deposit to pay for some of your loss.

2. If he is being transferred, possibly his company will pay for the rest of the lease. After all, it is their fault he is moving. Many times corporations will pay expenses for moves in addition to the normal moving van and new utilities.

3. If it is a divorce, see what you can work out. Ideas on that below.

4. If he has just decided that he wants to move, say no, the entire contracted amount of the lease must be paid. He can move, but it will cost him the rest of the amount due for the term of the lease.

How is the rental market?

1. If it is good, you can probably re-lease the property quickly for as much or more than you were getting from this tenant.

2. If it is slow, you may have to play a little hard ball. You will have a tough time re-leasing for the rental amount you were getting.

Your responsibility if the tenant moves out before the lease is up: Try to mitigate the damages, i.e., use your best efforts to get the place rented again.

The tenant’s responsibility if he moves out before the lease is up: Pay the damages incurred by the landlord.

If you use your best efforts to mitigate damages, and it takes you two months to rent the property for $100 less per month than you were getting from the first tenant, he owes you the two months’ rent plus $100 times the number of months left in the lease.

For example, say you had a one-year lease for a total of $7,200, or $600 per month. The tenant moves out after the first month, January. You cannot rerent until April 1. ($1,200) You rerent at $500 per month. That means nine months where you made $100 less than the first tenant was paying. ($900) The total the tenant would owe you is $2,100, plus whatever it costs you to in lawyer’s fees and court costs to collect.

Two ideas for helping both sides

1. See if the tenant knows someone who would like to move into the property. If he has been a good tenant, chances are his friends would be too. Just do the checking you would normally do for a new tenant.

2. See if you can get the tenant to offer some kind of compensation for letting him out of the lease. Sometimes they’ll offer more than you would have gotten otherwise.

(Disclaimer: Laws differ from state to state. Make sure this is the law in your state before you proceed with this advice.)Copyright 2010 Cain Publications, Inc., used by permission.

 
Robert Cain is a nationally-recognized speaker and writer on property management and real estate issues. For a free sample copy of the Rental Property Reporter call 800-654-5456 or visit their web site at www.rentalprop.com.
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