How Can a Landlord Terminate Lease Early? Is It Legal
We want our tenants to stay for the complete term of the lease and this is the reason we stick to fixed-term leases majorly. Sometimes, however, circumstances change and we landlords need to terminate the lease early with our tenants. Is it possible and what are the reasons a landlord can break the lease early, that too without breaking the law? This is our take on this article today.
So if you are stuck with this kind of situation and wondering what to do, we have come up with lots of information surrounding the topic. A landlord must know his legal rights to avoid distressful and unwanted legal hassles. Keep reading!
Good tenants don’t deserve an unexpected and an early farewell. A landlord who is terminating the lease early must have a valid reason to do so unless you haven’t signed a fixed-term lease with the tenant. State and Federal laws require landlords to serve proper notice before terminating the lease early. Further, a lot more depends upon what provisions your lease has for such situations.
Termination of Lease Early With a Cause
It is as easy as it sounds, terminate the lease of your tenant early if you have a cause. The cause is the violation of the terms of the lease by your tenant which serves as a proper ground for ending the lease early. Depending upon the violation, you can
- Serve a 3 Day Cure or Quit Notice
- Serve an Unconditional Quit Notice
A Cure or quit notice presents your tenant with a fair chance of curing the violation within a set deadline or else the tenant has to leave. You can simply terminate the lease then. An unconditional quit notice lets you terminate the lease when there is an incurable violation. However, if your tenant refuses to leave in either case, you have to file for eviction.
Termination of Lease Early Without a Cause
A fixed-term rental lease legally binds a landlord to provide a habitable place for the tenant until the end of the lease. It is unlikely that the landlord can terminate the lease early when there is no violation of the lease or when there is no reason. However, a lease can still be terminated early without a cause. Without a cause doesn`t mean there is no reason.
A landlord can end the lease early without a cause in certain circumstances provided the lease embodies provisions for early termination. The termination clause serves the purpose in cases when
Terminating the Lease Early Due To Sale of Property:
When you have an intent to sell your property, you may want to end the lease with your tenant early. Not every buyer on the market wants to buy a property with a tenant inside. And if you have one, the odds of selling your property at the right price get lower. Buyers are generally not interested in assuming the obligations of the current lease. And that the buyer can be looking to buy your property for self-occupation and not as an investment property.
Read: Selling and Buying Tenant Occupied Properties on Roofstock
The Due For Sale Clause:
Don’t want the tenant to stay until the end of the lease? Adding a sale due clause provides you an added flexibility and more control over your property. When you have a sale due clause in your lease, you are only required to give a notice of termination to your tenant and that is how you can end the lease early without a penalty. However, the notice must be given at least 30-60 days prior depending upon what state your property is in.
“The sale due clause enables landlords to end the lease early if you have an intent to sell your property during a fixed lease.”
a) Where Buyer Assumes the Obligations:
It is agreed upon that the landlord at any time may sell, transfer, or assign its interest in and to property and this Lease. In such an event, the transferor shall be relieved automatically of all and any of its liabilities and obligations accruing from and after the date of such assignment and transfer; provided the transferee assumes all of the transferor`s obligations under this Lease .
The tenant in such an event will be notified of the new landlord and the new landlord has the right to terminate the lease by giving a 30 days notice to the tenant.
b) Where Buyer doesn’t assume Obligations:
In the event of assigning the landlord’s entire interest in the premise or sale of the property either direct or indirect, the landlord shall reserve the right to terminate the lease by giving a termination notice to the Tenant in writing. The lease shall be terminated automatically after sixty days from the termination notice.
If you are selling your complete interest in a multifamily property or an apartment complex, the lease must be terminated for all tenants, not just one.
2. Termination of Lease Early For Remodel and Repairs
A landlord can terminate the lease early for repairs and remodeling of the property. It is the landlord’s responsibility to provide a habitable place for tenants to live. And if repairs or remodeling requires full access to the property, you can end your tenant lease early.
The thing to understand here is that the repairs or remodel must be substantial in accordance with law and the timeline of which is longer or indefinite. Further, you are also required to give a written termination notice, days before as required under your state laws. Also, ending the lease in between, you must prorate the rent and return the tenant’s security deposit.
In case the repairs can be done without the requirement of the tenant to vacate the premises, you can’t terminate the lease early during a fixed term. And if you try to terminate, it can be booked under retaliatory termination by the landlord.
Read: What Repairs are Responsibility of A Landlord and What Aren`t?
Clause For Termination of Lease Due to Renovations or Remodeling:
If it requires the termination of the lease to carry out necessary and reasonable repairs and renovations at the property. The landlord, in its sole discretion, may terminate the lease by giving written notice prior to 60 days of such termination.
3. Termination of Lease Early Due to Damage or Destruction
When your rental property is substantially damaged or destroyed due to perils or the tenant’s negligent or intentional acts. You may want to end the lease and discharge your obligations under the lease. A landlord is responsible for providing a warranty of habitability. And in such a case, you may be stuck up with making repairs immediately and providing a temporary accommodation at your expense.
However, if you have a clause in your lease of terminating the lease early for such a case, you are better off for good.
Clause For Termination of Lease Due to Damage or Destruction at Property:
The Lease shall cease and shall terminate at the landlord option if for any reason the rented premises are damaged or destroyed by perils, nature, the act of God, accident, or condemned by the government authority from the date of such event. The tenant waives any claim of liability towards the landlord resulting from such an event.
It is always wise to require your tenants to have Renters Insurance to protect yourself from liabilities.
4. Termination of Lease Early For Owner Move-in
It is possible for the landlord to terminate the lease early for the reason of moving in the property or self-occupation. A landlord, his immediate relatives, or a person who owns 25% interest in the property is qualified for move-in termination. The property must be occupied by the owner for at least 36 continuous months and should be his principal residence.
The landlord must give proper written notice of termination to their tenant having such an intent. If there is more than one unit available in your building, only one unit is permitted for self-occupancy. And if you have another comparable unit that is vacant or gets vacant during the notice period. The same shall be offered to the tenant whose lease is about to be terminated. Also, some states require landlords to pay for relocation charges if the tenant has to move out.
Don`t forget to account for all the tax implications when you move into your investment property. The major being the depreciation recapture tax.
5. Mutual Termination Of Lease:
As the name suggests, early termination of the lease is possible if both parties mutually agree to it. Not every time, the situation remains constant and either of the parties may want to terminate the lease consensually to avoid hassles. Having an early termination clause incorporated in the lease informs both parties beforehand of the implications of terminating the lease early.
Generally, an early termination fee applies if either of the parties wishes to terminate the lease. The party who wishes to end the lease early simply sends a written notice to terminate and pays an early termination fee. This way both parties can mutually terminate the lease and discharge each other from obligations of the lease. A win-win situation for both the landlord and the tenant.
An Early Lease Termination Clause:
If either party chooses to terminate the lease before the term ends, an early termination fee will be applicable. Both parties understand that the early termination fee is not an extra fee charged to relieve either party from the obligations of the lease, but a way to mitigate the cost of expenses incurred for either re-renting the apartment or for the relocation. The exact cost of which is hard to determine, so both parties agree to pay a known fixed cost of $________________.
What if the Tenant Refuses to Leave During Early Termination of Lease?
A tenant can refuse to leave when you are terminating the lease early even after receiving a notice. You can deal with such a reluctant tenant legally. The final step is always eviction. But even before eviction, you need to ensure a few things.
a) Ensure a Proper Notice is Given:
Every state dictates its own rules when it comes to giving the notice to vacate to your tenant. In general, when a cure or quit notice or unconditional quit notice is served, a tenant has 7 days before a landlord can file for eviction. But for cases when there is a termination without a cause, a 60-90 days notice is required by states before you can go for eviction. Hence, it becomes imperative that you work with a landlord-tenant attorney for such cases.
b) No Self Help Eviction (Forceful and Retaliatory Eviction ):
Keep your calm and avoid things that constitute a forceful and retaliatory eviction at every cost. Because, if you try to indulge in such practices, things can get ugly and you can encounter legal hassles. There is always a legal recourse and you should keep in your nerves. Things that can account for forceful and retaliatory eviction include
- Changing the locks
- Removing tenants belongings
- Shutting off Utilities
- Unjustified Rent Increases
- Decreasing Utility Services
- Terminating Tenancy Early due to Arrears in Rent
c) Confronting / Working with the Tenant
Evictions are costly and consume a lot of your other resources. It is neither in your favor nor in your tenant`s favor. It’s the ultimate recourse when you just want the possession of your property back from the tenant and the tenant is not at all cooperating.
It’s perfectly alright to have unplanned events come up your way and you want to terminate the lease with your tenant early. You can expect your tenant to cooperate with you in such situations. But your approach should also be in the right direction. You have to be emphatic towards your tenant. It is always better to work with your tenant on solutions that work best for both parties.
- Your tenant can be a potential buyer. Always give them an option if they are interested in buying from you.
- Reward your tenant if any of their acts can help you get a better price, say a clean and tidy property or maybe simple cooperation during showings.
- Cash for keys can be a considerable option if your tenant is willing to work that way.
- You can also pay for their relocation expenses if you want your tenant to leave early during the term of the lease.
Read: Should You Consider a Month To Month Lease over a Fixed Term Lease?
Sending an Early Lease Termination Letter
An early lease termination letter is a written letter sent by either party to terminate the lease before an already set date in the lease. This letter is sent 60-90 days depending upon the state before the actual termination of the lease.
So, when you decide to terminate the lease early without a cause, you are required to send your tenant the early termination lease letter. If the termination is due to a cause, you can simply send a notice to vacate.
Send this letter to your tenant via certified mail or first-class mail. You can also paste the letter at the door of your tenant. Depending upon your state, an email or a text can also be a legal way to communicate. Whatever it is, there must be proof that your tenant has received the letter from you.
Writing an Early Lease Termination Letter
- Try to be polite and emphatic in your letter. It should not come as a shock to the tenant.
- Cite the actual cause for early termination (You can also include the proof of cause if available)
- Mention the exact dates when the lease will be terminated and the tenant has to move out.
- Include move-out instructions and how you are going to refund the security deposit.
The Bottom Line
Entering into a lease agreement with a tenant is a long-term commitment. But circumstances can change and ending a fixed-term lease early can get complicated. It is always best to incorporate the provision in your lease if such a situation ever occurs in your business.
Liked the article? Do read our previous article on what landlords can do if the tenant wants to terminate the lease early. Also, don`t miss out on joining our subscriber list. We send regular emails to our subscribers for all the updates that happen on our blog.