Lease Breaking:
A Guide for Landlords

Krista Reuther: Hello, hello. You are here to learn about lease breaking. This is our guide for landlords. So we will go over the various things you need in your lease, along with some of the rules and regulations that you might not know about that could land you in hot water. Specifically, the key takeaways for today are going to be that you will understand why an eviction is not the same thing as breaking a lease and why we make a distinction between the two. We’ll also download you on all of the commonly speaking myths so that you can avoid litigation when you really don’t need it. And of course, we’ll be going over an early termination clause, what that is, how you can add it in, and what kind of language you need to make sure that you and your tenant are set up for success. All right. So kicking things off at the very top, why am I making a distinction between lease breaking and evictions? It’s a good question.

You might say that I’m being a little bit nitpicky and sure, maybe a little bit, but it’s for a good reason. Lease breaking is actually exactly what it sounds like, right? It’s where you are terminating a contract before its expiration date. We’re specifically talking about residential rental agreements.

Okay. So with this, there are a lot of different moving parts. Each state has its own rules about what constitutes a lease break, what’s legally covered, and what’s not.

But we’ll go over a national scope and also make sure to highlight some points where you need to do a little bit more research to make sure you’re in the clear for your specific situation. That said, commonly, lease breaking can incur a fee either on the landlord side or from the tenant. It will require specific notice to be given regardless of who initiates this proceeding. And really, it should be outlined in your lease agreement under an early termination clause so that everybody involved understands what kind of situations qualify for a lease break, the amount of notice that will be required, how that notice will be given, and of course, any other little bits and details that you need to make sure everybody’s on the same page about what to expect. So we’re going to nail this terminology, right?

We’re really going to get this. When we talk about evictions, evictions are more often more drastic than a lease break. This is something that invokes the courts pretty much all of the time, right? So you can start the eviction process with a notice to vacate, a notice to comply, etc.

But if it goes far enough down the line, you’re going to have to bring in the courts. That’s not the case with lease breaks most often. Similarly, an eviction is enacted only by the landlord. The tenant cannot evict you, right? Like that just doesn’t make sense. But a lease break could be enacted by either the landlord or the tenant.

So it’s either or situation. The last key difference that I want you to really take home is that an eviction typically stays on a tenant’s record, but a lease break doesn’t. So if you’re curious about that and about what that might entail, maybe you want to learn more about evictions, we have so much content for you.

This is something we talk about all the time. So I’ve linked out to a blog and a webinar in this deck. As I mentioned, we will be sending this deck over to you after our presentation wraps. So you’ll be able to check all of this information out as well. But today we’re really going to focus on the lease-breaking aspect.

One final note on this slide. The reason that there’s an asterisk on the tenant record is because there are states that do not allow the reporting of eviction history. I believe New York and Illinois are two, but Jeanne, keep me honest. I just know that those states typically have some kind of extra complication with their rules.

So if you’re a landlord there. Well, that that is tricky. Good for you.

Definitely get a little bit hairy with all the different laws and things going on. All right. So we have yet another poll popping up.

This is our second poll of the day. I just want to get a read on what you guys have experienced so far as landlords. So I want to know how many evictions have you gone through.

How many times have you broken the lease as a landlord and how many times have you had a tenant break the lease. There are no wrong answers here. I would say, you know, the our person, my personal stance on evictions is that it should be treated as a last resort.

There’s a disproportionate impact on evictions. If you want more information there again, check out the webinar. I won’t bore you with it here. But breaking a lease could come up for a variety of reasons, many of which we’re going to cover today. So, I’m going to give you a little bit of a quick recap about what this is all about. I’m going to give you all like 12 more seconds to make it a cool even 50 seconds.

But it’s really interesting to see these results starting to pour in. It looks like most of you as landlords have not broken the lease before. We’re looking at about 84% currently versus many folks having tenants who have broken the lease.

Certainly a scary situation, especially if you’re counting on that rental revenue to be flowing in. But don’t worry, we’ll go over everything you need to know. And look at that.

All right. So most folks have not gone through an eviction. That’s really great to see. To me, that indicates that you are, you have a lease agreement that’s working, you are getting people screened, you are setting up these relationships so that it doesn’t peter out. That’s not to say that if you’ve had an eviction, it’s your fault.

Sometimes, really, it is the last case scenario, but it’s one that you have to use. So just a sticky situation overall, but it also looks like we’re holding steady with most of us not having broken the lease, but at least half of us have at least encountered a tenant breaking the lease once, which is interesting to see. Okay.

So let’s talk more about that. When can a tenant legally break the lease? What I mean here is that there are situations in which tenants can break the lease without penalty, and this is on a national level. We’ll go into some differing situations and what that all looks like. But first, I have a very exciting game for you. So this is a little game we like to call, is it legal?

And I’m going to share with you a couple of scenarios and I just want you to tell me in the chat whether or not you think that the tenant can break the lease without penalty. Right. That’s what we’re saying when we say is it legal.

I’m saying is there going to be a penalty assigned? So let’s get started. Round one.

Very exciting. Mary moves south. So your tenant, Mary has rented with you for three years. She’s been offered a dream job in Antarctica. She’s going to be tracking penguins, I presume. But her contract starts halfway through your current lease agreement.

So does Mary have federal protection to break the lease without penalty because she’s moving for a job? Let us know in the chat. Go ahead and pull that up. Looks like most folks are saying no, no, no protection and says, yeah, let’s see. Yeah, most people are saying no, we’ve got a couple of yeses. That’s how you know this is a good game. Here’s the truth, guys.

No, a new job, no matter how exciting, is not a federally protected reason to break a less a residential lease. That’s just unfortunate, but true. Right. So if she is going to go out to the Antarctic, she is going to, you know, possibly face penalties for breaking this lease early regardless of her history with you.

As long as you have that language in your documents. Let’s play round two. Round two.

Two. Taj gets his orders. So you have a tenant named Taj he just moved in last week. However, he promptly received a permanent change of station orders he is an active duty military member. So he’s going to be moving to Kansas for the foreseeable future. Does he have federal protection to break the lease without penalty, given that he is moving for active duty?

See everything coming in people are like yes, yes, absolutely military is protected with proper documentation. Kendall you’re reading my mind. And says yes, Taj is as good as he should be. Yes, yes. You guys are smart cookies.

You’re absolutely right. So Taj would be protected under the service members civil relief act, and we’re going to talk about that a little bit more later, but the key pieces of information here is that one, he has received permanent change of station orders so that means that he is going to be gone for at least, I believe the cut off is 90 days but I have it on a slide. So he’s going to be gone for a significant period of time. He cannot be penalized even though he just moved in last week. If this notification came in. Before he signed the lease, then that’s a different conversation.

However, if a lease is signed prior to these orders being given, he’s federally protected. All right, last round here. Let’s go. We’re entering Howard and the mouse house. Okay, so nobody likes this kind of situation, but Howard moved into the property two months ago and has seen mice every single day multiple times a day since moving. He also is facing the fact that his hot water doesn’t work and neither do his sinks, his ovens also not turning on.

He reported these issues to his property management company upon moving so the same day that he moved in, he also let the property managers know it’s now been two months does Howard have federal protection to break the lease without penalty. Yes, lack of habitability says Albert when he says ye, Jeremy says no. Kendall if he has a solid case in communication history then yes, we’ve got some no some yeses no escrow only says Valerie.

Okay, quite a lot of differing opinions, which makes sense it’s a complicated issue. But Odle nailed it the landlord is obligated to provide habitable conditions, which means that yes, because Howard has given his notice he’s he’s communicated the issue with the property management company. And he is letting them know that this is an active ongoing situation that has not been resolved. That is going to mean if it continues to not be resolved, he can break the lease. This example actually comes from a real case in Dayton, Ohio, from just this year. So the tenant actually ended up withholding rent and that led to the landlord issuing an eviction notice that eviction notice was illegal.

So Howard was scheduled to appear in court but the landlords lawyers reached out with an agreement to get him out of his lease early without penalty, while providing time to move out without owing additional rent and giving back his security deposit without the conditions of the unit being used against him. According to the date and daily. So this really does happen. That’s why it’s so important, even though you might be like, Krista, I would never let my property get overrun by mice, I would never let this happen. It’s still good to know about because one, it just, it keeps unfolding. This is something that, unfortunately, is kind of routine in a lot of parts of the country so you need to know about it. And also it helps you be a better landlord by knowing that there are these different situations at play. Also also encourages you to take your, your tenants maintenance request seriously.

You really need to be up on that, especially if there is an infestation of sorts, especially if they don’t have hot water. And that’s where that is something that you are bound to deliver under the warranty of habitability. So, please, please, please make sure that you are doing right by your tenants. Otherwise they could both withhold rent and break the lease without penalty. So, with that in mind, let’s go over some of the specific situations that allow a tenant to break their lease without penalty. We’ve hit on a couple of these.

Let me swap that around first. Since we’ve hit on a couple, let’s actually look at the situations in which a tenant could face a penalty. So, according to the balance money.com, if your tenant needs to relocate due to a new job, again, we’ve covered this with Mary, that’s not a legitimate reason to break the lease. And on the flip, if they’ve lost a job and they’re unable to pay rent, they’re still bound to the terms of lease agreement, although at that point, you know, it’s a bit of a different conversation. You want to work with them so that you can make sure you’re getting something back and also not driving them, I don’t know, out into the streets.

But you know, it’s that balance of having an investment and needing money to come in but realizing they don’t have money and trying to find a solution that works for both of you. Also, if someone has purchased a home, that does not give them the right to break your lease without penalty. They are beholden to that lease agreement until it’s expiration date.

So that is something that they should factor in or that you should consider if you do have someone mentioning home buying. A couple of more reasons here, if there’s a change in relationship status, so they get married or they get divorced, that is not a good legal reason to break the lease. Now what you might run into, especially with the divorce situation, is that one person is staying in the unit and somebody else is moving. If that’s the case, you might want to re-screen the person who is staying just to make sure that they have the proper income to stay in that space. Could be that they were relying on the other person to provide some part of that income and rent could be up in the air afterward. But just make sure that you’re having clear empathetic conversations with your tenants when this kind of life change happens. And lastly, if they move in and they figure out that they don’t like the area, you know, that’s not, it’s unfortunate, but it’s not a valid reason to do that. They’re not willing to break the lease.

Okay. So these are all the reasons that typically tenants can be penalized if they, if they enact this and break the lease, right? However, if they do break the lease, even if it’s under a situation in which they don’t have federal protections, you cannot sit back and just sue them for the unpaid lease term without trying to reroute the unit.

So this is called your duty to mitigate damages. You need to be looking for an additional renter or otherwise someone to come and pick up that slack and move in. You can’t just sit back and wait and then sue them after the fact to say, hey, I didn’t have rent for six months. So now you owe me that rent.

No. As soon as they give you their notice, you should be trying to find somebody else to move in. If you have language in your lease that says that it’s the tenants duty to find that person, that’s a little bit of a different situation. But if that’s not in your lease, it’s your duty and you need to really make sure that you are pursuing an additional tenant. That said, your duty to re-rent has some limitations, including the fact that you can hold tenants responsible for the costs of advertising and showing the unit. However, if you do it for free on TurboTenant, you save you and your landlord some money while finding a great tenant.

That’s just a little sneaky plug there. I will also say that you have to take reasonable steps to re-rent the apartment, not heroic ones. So you don’t have to give special priority to that unit in order to re-rent it. You can really just treat it as you would any other vacancy. And that is your right as a landlord. You also don’t have to accept any applicant who walks in the door. You should still be screening these people. You should still be following your due diligence, regardless of the situation that led to the lease break.

And something that I really want to cap off here is that unfortunately a lot of landlords aren’t aware of their duty to re-rent for the benefit of the departing tenant. So just really take this home with you if this is the only thing you remember. Fine. Please watch the recording to remember some other things. That’s okay.

Just know that this is part of your job. You have to try and re-rent the unit. And that will help you both get somebody back in who’s paying you rent regularly. And let your tenant go off. If they don’t want to be in your unit, you don’t want them in your unit. Let them go.

Okay. I know it kind of, it might give you pause because you’re like, Hey, this person has, you know, given me a financial punch to the gut and I have to still do this work to try and find someone who’s going to take up their lease. Yeah, you do. That’s part of your job.

It’s unfortunate, but it’s part of your job. All right, so we’ve gone over some of the more negative parts. Let’s talk about why your tenant could legally break the lease without penalty.

So we have, of course, touched on bits and pieces of this. I will say once again, there are state-specific laws that come into play. So we’re going to cover this from a national perspective, but I would highly, highly encourage you to please go look up your specific laws. Because there are states where, for example, somebody being over a certain age can qualify them to break a lease. So look up your local laws.

It will make you happy and it will keep you compliant, which is really important. But on a federal level, you can usually expect the following to allow your tenant to break the lease legally. So if you fail to make repairs and provide maintenance, your tenant can break the lease and pursue legal action by going to court or reporting you to a government agency such as the Department of Consumer Affairs.

If you illegally enter your tenants unit, that can really quickly snowball into a reason for them to break the lease. You should never do that. Always give them the proper notification. It’s their home. It’s your property, but it’s their home. So you really need to be giving them appropriate notice in all situations that are not emergency situations. If you don’t do that, that is the number one way to one, ruin a relationship with your tenant, but to enable them to break your lease early because it starts to look like harassment. And that plays really nicely into the third bullet point here, which is of course harassment and privacy violations. If you are harassing your tenant, they have the legal right to leave. This protects tenants from feeling unsafe in their own home and harassment doesn’t just mean entering when you’re not supposed to, right? It can also include verbal abuse, physical threats, threats of eviction, destruction of their property, or anything else that makes them feel unsafe. If you’re saying, well, Krista, I have a property manager and they handle all of this stuff for me like there’s nothing I can do as a landlord that would cause this to unfold.

Make sure your property manager knows that if they undertake any of these actions, the tenant can still break the lease. It doesn’t have to be you. It just has to be someone attached to the property. And then you’ll be out a tenant and possibly facing litigation as well. So don’t do that. Okay.

This next bullet point is, of course, what we mentioned with Taj. If there is an active duty situation or a change of station orders have been delivered to a reservist, an active duty member, etc., the Service Members Civil Relief Act gives your tenant the right to break their lease without penalty. So this only really comes into play if the lease was signed before they entered active duty and will remain on active duty for a minimum of 90 days. They have to provide you at least 30 days notice to move. And you are allowed to ask for proof. You’re allowed to ask for a copy of the orders or otherwise get more information to validate the situation and then let them go. Okay.

A couple more points here. If your tenant is a victim of domestic violence, they can take certain legal measures to help them get out of their lease. There are laws in place to protect victims of domestic violence.

Typically, they have to give you 30 days notice. You can ask for proof. I am going to encourage you to tread with empathy.

Okay. Domestic violence is a very complicated crime and it’s a very painful situation for someone to be in. So the last thing they need is a landlord being cruel or unusual when it comes to gathering that evidence. So please, please, please tread with empathy if that is something that’s going on. Okay. Very last thing we want to talk about on this slide is just the fact that if your property is illegal, maybe it was zoned for, let’s say, an industrial area, or it’s just not habitable. That is a reason for tenants to break the lease with all of this, they have to give you notice. Typically, it’s at least 30 days.

Again, it might vary by your state. Okay. So you will be receiving notice. It’s not like someone can just wake up and say, hey, you entered my unit illegally last week and I’m moving out today. That’s not really the situation. It requires more conversations. It requires a specific notice be sent.

And you can dictate those terms in your lease agreement. All right. So I’ve thrown a lot of information at you. I’m going to pause here for a second and just take a quick look to see if there are any kinds of questions I can answer now. Okay.

How about when tenants are the ones to break the lease? Great question, Mario. We are going to cover that next. Oh, wait, I did cover that. So we did cover that. All right. Some interesting questions here.

Most of these seem like things we should address with Jeanne at the end. Jennifer, if a tenant pays rent via Zelle on time, does the landlord require to provide a receipt? For documentation purposes, I would just provide one. Your requirements are probably going to come down to the state level and what’s required in your area. So I would look that up.

But just to be safe, I would say make sure that you’re providing a receipt whenever possible. All right. And I see Jeanne is at work typing away in there.

So she might answer some of your questions before I reach them, but keep them flowing in. With that in mind, let’s talk about some situations in which you as the landlord can break the lease and why you might want to do that. First, we’re going to start with stuff that’s not true. We want you to understand some of the lease-breaking myths that often pop up so that you don’t get yourself into trouble. So as we’ve mentioned a couple of times during this presentation, there are state-specific laws and often county-specific laws that dictate when a lease can be broken. With that said, by and large, you can’t break a lease early on a whim, meaning there’s no documentation in your lease agreement.

You’re just deciding one day. You can’t break it early because you want to move in. You can’t break it early because you have a friend or a family member in need of housing, and you can’t just break it early because you decide to sell the property. Now, the big caveat with this is that your lease agreement is a binding document. So if you have information in your lease agreement that speaks to some of these conditions and everyone signs off on it, t