I’ve been a landlord now for 4 years, certainly not a significant amount of time but I’ve still had a fair share of dealing with certain situations related to my rental properties. Until this year I never had a tenant let me know they were planning to vacate the property prior to the end of their lease agreement. This not only happened once, but twice in the same year.
If there is something that has led to this ‘problem’ it’s because I often select too-good of tenants. Because of this, I often get tenants who stick around for just 1 year (or less) which is a standard lease term for my rentals.
My typical tenants are typically high earners with quality jobs. Often they are new to the area and want to better understand the city before they purchase a home. In some cases I’ve rented to families upgrading from their current rental situation but this is not the norm.
In both circumstances this year the tenants were anxious to purchase a home despite having 6+ months remaining on their lease. Since these are quality tenants they were aware that they are bound by the lease terms. I also reiterate this when signing the lease that tenants are responsible for the full year of rent regardless of what happens. I also don’t accept tenants to sublease the property.
When I was made aware of the tenants moving out early I explain to them that I will advertise the property for rent. If I am able to find quality tenants I will make an amendment to the lease which officially breaks their obligations of the lease. In both cases I charged $1,000 to break the lease to compensate for my time. This is a fraction of what they would have to pay if the property were to left vacant. If the tenant is closer to the end of their lease term I’d consider making the fee less since I’d have to find new tenants soon anyway.
A few tips when going through this process:
- Ensure the tenant understands what happens if you don’t find suitable tenants. If the tenant moves out with no new tenants in place they should keep utilities in their name as well as the keys.
- When seeking new tenants offer a longer lease term so the lease will end during the same time of year. Alternatively you can offer a shorter lease term for the remainder of the lease that was in place by the previous tenants with an option to renew for another year at that time. This is especially important in colder climates or if tenants move out during the holiday season.
- Don’t sign the amendment to the lease until you have collected the security deposit from the new tenants.
- Keep the tenant updated on the progress of finding new tenants so they can plan for the possibility of future rent payments.
In one case I was able to sign a 18 month lease and in the other I signed a shorter 6 month lease with an option to renew 60 days prior to the end of the lease.
So far this process has worked out for me. Although it’s unfortunate to have to find new tenants before the end of a lease it can certainly be an opportunity for more profit.