Mitigating the Impact of a Tenant Breaking a Lease

By Kaitlin Hurtado on February 17, 2024

When it comes to property management, you are going to be navigating a variety of issues on a daily basis. From screening tenants and filling vacancies to responding to routine maintenance requests, it is your duty to address concerns on the property, from bringing new tenants on to overseeing their move-out. Unfortunately, not all leasing situations will start and end smoothly. One situation you may find yourself in is a tenant breaking their lease unexpectedly.

No matter what kind of clause you put in your lease agreements to protect you in such an event, you and your property will still face the impact of a tenant loss. Keep reading for tips on mitigating the impact of a tenant breaking the lease.

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Review your lease agreement

Mitigating the impact of a tenant breaking a lease begins as early as the initial lease agreement. The lease agreement should include verbiage about what will happen in the event of a tenant breaking a lease.

Will there be an extra fee charged to the tenant when they break the lease? Is it a one-time fee or will it continue on a monthly basis as their scheduled rent payments would have been? Make sure that your lease agreement clearly outlines early termination fees, notice guidelines, and so on so your tenant knows what to expect when they break their lease early.

If you want to keep the security deposit in the event of a broken lease, make sure the lease agreement clearly addresses how a security deposit is forfeited in the event of a broken lease. A security deposit could help you make the unit ready for a new tenant or cover potential rental loss in the future and add extra security for any lease-breaking with tenants.

Follow your state’s laws

Depending on the state you live in, you may be required to make efforts to find a new tenant or re-rent, instead of just waiting for the vacating tenant to pay their rent through the end of the lease term. The requirement to re-rent is also referred to as the landlord’s duty to mitigate damages. Be sure to review your state laws to ensure that you are following the correct guidance when mitigating damages when a tenant breaks a lease.

Rerenting will require you to make an effort to market the property as available, screen applicants, and accept qualified tenants just as you would with any other vacancy on your rental property. As long as you are making a reasonable effort as defined by your state laws, you can legally collect rent from the vacating tenant until a new tenant is secured. This can help you recover the potential rental loss you would face from a broken lease.

For example, some states will not hold any responsibility to a landlord for rerenting to a new tenant. Other states require a landlord to make reasonable efforts to re-rent but also allow them to keep the lease in effect and hold the vacating tenant responsible for rent while a new tenant is secured.

Collect fees as soon as possible 

Whatever fees are due upon a tenant breaking their lease, make every effort to collect the money. This can include the early termination fee and any overdue rent.

Depending on the situation, you will want to sign an end-of-lease agreement with the vacating tenant. The agreement should note what is happening to the unit, what money is still owed by the tenant, how the security deposit will be handled, and make the situation clear and documented.

Get the unit move-in ready as soon as possible

Regardless of your state laws, you will want to fill the vacancy as soon as possible. This will not only help eliminate future back-and-forth with the former tenant if they are still expected to pay rent, but it can also help you move past the situation and shift your focus elsewhere once you have a new tenant and lease agreement in place.

As soon as you receive notice of a tenant breaking their lease, get the ball rolling on making the unit move-in ready. Think of it as a fast track for a typical move-out. Inspect the unit, note any repairs that will need to be addressed, and schedule any services that will be needed. The quicker you jump on unit turnover, the more likely you are going to be able to minimize the impact of the tenant breaking their lease.

Having a tenant break a lease unexpectedly can be stressful for everyone involved. With this information in mind, you can help yourself mitigate the impact of a tenant breaking the lease.

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