Posted on Nov 22, 2017
After accepting a tenant for a vacant apartment, you move to decline all other applicants. However, if your tenant wants to break your lease before moving in, what happens to your vacant unit? Find out how to move forward in this unpleasant situation to protect your interests and recover quickly.
What if tenants change their minds before signing your lease? If your tenant changes his or her mind before signing a lease, all you can do is advertise your vacancy immediately and hope to attract another tenant. It might be worth reaching out to previous applicants, who may still need a place to live. A verbal promise to occupy the apartment, or a verbal lease, is not binding.
What happens if you accepted a security deposit? If you accepted a deposit to hold the apartment for the tenant, you can keep this deposit.
Once a tenant signs a lease agreement, he or she has entered into a binding contract with you. If a tenant changes his or her mind and decides not to move in, the tenant effectively breaks that lease. What happens next depends upon the specific language of your lease.
What happens if your lease has an early termination clause? If your lease has an early termination clause, then it spells out what happens in the event the tenant breaks the lease early. This clause might say that the tenant can be assessed a one-time fee equal to one month’s rent, for instance. A security deposit protects damage to the apartment and cannot be used to cover a lease’s early termination. If you collected a security deposit from the tenant, you must refund it.
What if you didn’t include an early termination clause? If your tenant signed a lease that doesn’t have an early termination clause, he or she is liable for the entirety of the lease term (e.g., 12 months or one month for a month-to-month lease). However, you, as a property owner, are obligated to try to find a new tenant. If you are able to find a renter within two months, the tenant who broke the lease is only liable for those two months, not the 12-month period.
Depending on your state’s laws, the tenant who broke the lease may have to pay your costs for advertising the rental.
How to Protect Yourself From a Tenant Breaking a Lease
While you can’t prevent a tenant from breaking a lease, you can protect yourself in two ways: Documenting everything — in case the issue goes to court — and making sure your leases protect your interests.
If a tenant verbally tells you he or she won’t be moving in, ask him or her to send you a written 30-day notice for your records. Maintain the written notice as well as your signed lease and any email correspondence with the tenant. Remind the tenant that he or she is liable to pay the rent until you’re able to re-rent the apartment. Then, focus on finding a qualified replacement tenant.
As you screen potential tenants, review your lease agreement. Did it offer protection against a tenant breaking a lease, or did it lack an early termination clause? If you need to update your lease, you may be interested in becoming an American Apartment Owners Association member. Our members receive the lowest price on landlord-tenant forms, updated landlord-tenant laws by state, and access to tenant screening services.