Get-out-of-lease-free card?
Tenant buys house, seeks special treatment
November 19, 2009
By Robert Griswold
Inman News®
Q: I have been a tenant in a rental home for the last few years. A few months ago I signed a new 12-month lease but I just bought a new home and will be moving in next week. My lease doesn't expire for eight more months but I couldn't pass up this great opportunity to become a homeowner. Unfortunately, I can't afford to pay the rent and the new house payment. How can I break my lease?
A: In most residential leases, there are no provisions for the tenant to unilaterally break or terminate the lease because he or she purchased a home. A lease is a binding legal contract, and the landlord entered into this agreement with the understanding and expectation that you would stay for the duration of the lease. Often the landlord will even give you favorable terms such as a lower monthly rent based on this long-term lease. So to tell your landlord that you are moving next week and don't want to be responsible for the balance of the lease term is not likely to receive a positive response from your landlord.
This applies to all circumstances where a tenant might find it advantageous to break a lease, such as finding a better deal on an apartment, a job transfer, a change in a relationship, or any other personal situation that arises and the tenant suddenly decides it is in his or her best interest to relocate. The only exception would be if you had negotiated with the landlord in advance for the right to terminate the lease.
This "lease termination" clause can be specifically and narrowly written to be only for certain predetermined reasons like a home purchase, a job transfer, or it can simply allow the tenant to leave without stating a reason. In today's weak rental market for most areas, landlords are willing to agree to a lease termination clause that would allow you to break the lease under mutually agreed upon terms such as a flat dollar amount or a penalty of one or two months' rent.
Unfortunately, you did not plan ahead and now are expecting the landlord to absorb the loss of income on your rental home. You should have considered the fact that you would be obligated for another eight months on your current lease before purchasing the home. It may have been helpful to contact your landlord in advance when you first began to look at a purchase option.
Even though there is a lease and the landlord is not obligated to any changes in the terms, you may have been able to work together to start marketing the rental home while you are still there and possibly limit your liability if the landlord is able to re-lease the property before your lease expires in eight months. However, at this point, you should still contact your landlord immediately and explain the situation and see if he will agree to take a set amount of money if you agree to vacate this weekend and leave the property in excellent condition so he can have it back on the market immediately.
Q: I have been renting a house to three college students and their lease is up soon. However, I just learned that only one of the original students on the lease is still there. He does not plan to renew the lease and I am wondering what to do with the security deposit. How do I make out the refund check for the security deposit? Do I divide the security deposit into separate shares and send out checks to each of them? Or do I send one check to all three names? I am concerned that the one remaining tenant will claim he is entitled to all of the deposit back and then I will be sued by the other tenants. I am in a bind as I have no idea where the other two tenants are currently living.
A: You should make the check payable to all three tenants listed on the currently valid lease. So unless the vacated tenants have given you a written statement releasing any interest they have in the security deposit, you should make the refund check payable to all three named tenants. You do not have any information on the current whereabouts of the other two tenants, so your only option is to mail the check to the address of your rental unit.
It is likely that the current tenant will be the one who receives the refund check, but any challenges the tenants face in negotiating the check are their issues not yours. It is possible that you will be provided with the current contact information for the other two tenants before sending the refund check. In that case, I would suggest you still send the check to the property address and also send a copy of the check and the final accounting of the security deposit to the other tenants so they would be aware of the status of the deposit.
This column on issues confronting tenants and landlords is written by property manager Robert Griswold, author of "Property Management for Dummies" and "Property Management Kit for Dummies" and co-author of "Real Estate Investing for Dummies."
E-mail your questions to Rental Q&A at rgriswold.inman@retodayradio.com.
Questions should be brief and cannot be answered individually.
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