When Can You Break a Lease? | Think Realty | A Real Estate of Mind
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When Can You Break a Lease?

Breaking a lease with a tenant should be a last resort for landlords — you might end up defending a lawsuit, and replacing a tenant always costs money. Sometimes, however, it’s necessary to terminate a lease early if:

  • The tenant violates one or more provisions of the lease
  • The unit requires renovation or extensive repair
  • Your situation has changed and you need to move into the rental yourself
  • You need to sell the property

Whether you can legally break a lease with your tenant depends on three factors:

  • Your lease agreement terms
  • Local eviction law
  • Your reason for termination

This article explains how to break a lease with your tenant with or without cause and also covers alternatives to breaking a lease.

How to Break a Lease for Cause

The easiest lease to break is one in which your tenant has breached the terms of the agreement. Tenants who violate their lease by damaging property, sneaking in an unapproved pet, breaking laws, or failing to pay their rent may provide legal cause for eviction.

In many states, however, you can’t evict a tenant for minor lease violations. Your state may require you to give the tenant a chance to “cure” the lapse, perhaps by paying back rent or putting up a deposit for the pet. If your unit is rent-controlled, you may be allowed to break a lease only for certain causes. And if your tenant is covered by recent COVID relief legislation, you may not be allowed to evict for non-payment of rent.

First, check your state law. Every state has a list of conditions under which you can require an “unconditional quit” or termination of the lease. In most cases, late rent or other curable violations don’t qualify for immediate termination. So your first step is to see if breaking the lease is possible.

If you’ve determined you can legally break your lease, the next step is providing notice to your tenant in the form your state requires. State laws explicitly set out requirements for writing and delivering or serving a termination notice. You’ll provide one of these three notices:

  1. Pay rent or quit: If your tenants are not paying rent (and don’t fall under the provisions of any COVID relief laws), you’ll serve them with a notice giving them limited time (typically three to five days) to either pay the rent or “quit” (leave the rental).
  2. Cure or quit: When tenants break a condition of the lease other than paying rent (such as having an unapproved pet), you’d serve them with a notice giving them time to fix the problem or move out.
  3. Unconditional quit: This is normally reserved for serious offenses. Your tenants are ordered to leave the rental and provided no opportunity to cure their violation. State laws on unconditional quit notices vary, but most allow only a short period of time (for example, three days) for tenants to leave the property. You may be able to evict them with no advance notice for the worst offenses like threatening to harm others or using the premises for criminal activity.

If the tenant fixes the problem or leaves as directed, you’re in the clear. If a tenant doesn’t comply with the termination notice, your next step is to file an eviction lawsuit.

How to Break a Lease During COVID-19

Federal, state, and local laws may prevent you from evicting tenants for non-payment of rent until at least March 31, 2021. However, your tenants must certify under penalty of perjury that they meet all of the conditions listed below:

  • They have used their best efforts to obtain government assistance for housing.
  • A substantial loss of income makes it impossible for them to pay their full rent.
  • They are doing their best to make partial payments of rent.
  • Tenants would become homeless or have to share living space if you evict them.

In addition to the above requirements, your tenants would also have to certify that they meet at least one of the financial criteria below:

  • In 2020, they earned no more than $99,000 (individuals) or $198,000 (joint filers).
  • They did not have to report income to the IRS in 2019.
  • They received a coronavirus stimulus check.

In addition, tenants in rentals financed by FHA, Fannie Mae, or Freddie Mac mortgages may be protected under separate rules, and state and local provisions may also apply.  However, you might still be able to proceed with an eviction filing.

  • According to the CDC, you’re allowed to ask for proof that your tenant meets the guidelines listed above.
  • The protections extend to nonpayment of rent only. Tenants whose other violations are serious or who are unwilling to cure their violations can still be evicted.
  • Be careful to document the violations and follow the law to the letter.

Each state’s courts are handling the CDC eviction moratorium differently. Check your state’s guidelines before proceeding.

How to Break a Lease for Other Reasons

You might have no problem with your tenants but need to break your lease anyway. You may be able to break a lease under any circumstance listed in your lease agreement — for instance, to make necessary, extensive repairs or to sell the property to an owner-occupier — but it must be in your lease agreement for you to have that right. And if your investment property is rent-controlled, even reasons listed in your agreement may not fly unless they are allowed by applicable law.

You can include a wide range of early termination clauses in a lease. If you feel the need to include a lot of them, however, a month-to-month agreement might make more sense for you.

How to Break a Lease Without Cause

Finally, what if you need to break the lease for a reason not covered in your agreement or not allowed by law in your area? Avoid triggering litigation from your tenant by resorting to dirty tricks like shutting off utilities or trash pickup, harassing your tenants, or inventing lease violations that did not occur.

This is when it pays to establish a good relationship with your tenants. They may be willing to move if your reasons are compelling and you are willing to make up for the inconvenience to them. Ordinarily, “making up” means “paying up.” This incentive to terminate the lease early is often called “cash for keys” and offers a peaceful way to negotiate an out for all parties. How much should you pay? It depends. If you have a legitimate reason to evict, try offering half of what it would cost to evict them in court — your rental cash flow is more important than having an expensive day in court. Many landlord sites set $500 as the minimum offer. Other formulas are half a month’s rent plus the entire security deposit or one full month’s rent. If you have no legal cause to evict, consider offering to pay for the move as well.

The agreement should include the amount to be exchanged and the date the tenants will move out, and make sure everyone signs it. While offering cash for keys is legal in every state, it’s important that you comply with your state’s regulations to make the agreement binding. Even though it’s called “Cash for Keys,” pay your tenant by check and not with cash. Give your tenant a receipt and keep a copy for your records.

Finally, be there for a final walkthrough and once the tenants are out, change the locks. When a situation arises and you need to end a lease early, whether because of an irritating tenant or due to your own circumstances, terminate the lease legally and communicate openly with your tenants. Work with a real estate attorney to make sure your lease termination doesn’t end up in court.