Helping you achieve profits affordably

broken chain of paper clips - Breaking the lease - what to do

Breaking the Lease – what to do

Breaking the lease is an issue you will face as a landlord. The best defense is a good offense, and your lease should have a clause outlining what happens if the tenants break the lease before the end of the term. However, once tenants tell you they’re breaking the lease, what should you do?

The lease I use is created by the Calgary Residential Rental Association (CRRA). It has a clause that specifies; if the tenant breaks the agreement by vacating before the end of the term, the tenant is charged a re-rental fee of ________ (usually one month’s rent) plus the cost of advertising. The tenants are responsible for paying the rent until the end of the rental term or until a new tenant is found to occupy the premises. Additionally, if the premise is re-rented at a lower rate, the tenant is responsible for paying the difference between the two rental amounts for the balance of the rental term.

When tenants want to break the lease, they don’t usually pull out their lease and read the clauses; they call. Although I let them know I will try to work with them as much as possible and empathize with their situation, I’ve found it’s a good idea to re-send a copy of their lease with the “if you break the agreement” clause circled before we have a conversation about next steps.

By far, the two most common reasons for breaking the lease are couples split up and roommates don’t get along. 

The following are the three most common scenarios I’ve encountered with tenants breaking the lease and an action plan.

Joe and Susan move into your townhouse and sign a 12-month lease. They list both of their names on the lease as tenants. They seem like a perfect couple who will stay for many years. Halfway through the lease, their relationship goes south, and they split up. Where does that leave you and the lease?

One wants to stay and qualifies financially

  • Joe decides to remain in the townhouse, and Susan moves out. Joe makes a healthy income and can easily afford it.
  • Susan writes you a signed/dated letter stating she is moving out and will be removing herself from the lease.
  • You conduct a move out inspection
  • You send Joe and Susan their portions of the security deposit.
  • Joe signs a new lease
  • Relationship breakups don’t usually bring out the best in people, so it’s a good idea to have all your information documented and to give everyone copies. 

One wants to stay but doesn’t qualify financially

  • Joe decides to remain in the townhouse, Susan moves out, but Joe can’t afford the rent on his own.
  • Susan writes you a signed/dated letter stating she is moving out and will be removing herself from the lease.
  • Joe decides to take in a roommate to cover the cost of rent – he advertises for a roommate and finds someone
  • Until he finds a new roommate, Joe and Susan are responsible individually and together for the entire rent since they are both tenants on the lease
  • You must do your due diligence and screen the new roommate to ensure you have a quality tenant living in your home. Joe needs to know that his roommate will have to complete the same application process and meet the identical requirements.
  • After vetting and approving the new roommate, you conduct a move out inspection
  • Joe and Susan are given their portions of the security deposit.
  • Joe & the new roommate sign a new lease

Both want to leave

  • Neither Joe nor Susan wants to remain in the townhouse 
  • You are responsible for advertising to find new tenants to take over the lease
  • Until new tenants are found, Joe and Susan are equally responsible for paying the lease. You can go after each of them individually or both for the entire rent. They are on the hook for paying the total rent until new tenants are found to take over the lease.
  • You advertise, and a month later, you find new tenants
  • You conduct a move out inspection
  • Joe and Susan are given their portions of the security deposit
  • The new tenants sign the new lease

Over the years, I’ve experienced all the above scenarios. It’s always a good idea to talk to each of the tenants individually to verify their story and make sure they are on the same page with who stays/leaves. 

Emotionally, although I believe it’s important to empathize, it’s never a good idea to offer advice. Listen, show compassion, ask what decision they have made to move forward, and collaborate on the next steps. 

Their relationship is their business; your business is the property.

Let them know you will do everything in your power to help them find a roommate or new tenants to take over the lease. Remind them that until you find tenants, they are responsible for continuing to pay the rent. 

Breakups are difficult at the best of times; however, I’ve found it helps keep the conversations professional and centered on the next steps. Focusing on tieing up the present to move into a positive future set the tone for good karma, and we can all use good karma. 

What is the most interesting lease break you dealt with? I’d love to hear about it! Email me nelda@neldaschulte.com

Did you like this article? Follow me on Twitter @neldahelpsme and Medium.

I am a property investor who is passionate about helping investors who self-manage have profitable investment properties through resources and education. If you struggle with the wrong landlord forms, or worse yet, no landlord forms check out Nelda’s 10 Essential Editable Landlord Forms that help you separate the good tenants from the bad and increase your property’s profitability.

Leave a Comment

Your email address will not be published. Required fields are marked *