Sometimes, as a landlord, you might find yourself needing to break your own lease. Whether you're selling your property, moving back in, or dealing with other unexpected changes, the whole thing can feel like a big headache. If you’re in this situation, you’re likely asking: How much does it actually cost to break a lease? And more importantly, how can you keep those costs down while staying on the right side of the law?
Don’t worry, help is at hand in the article you’re reading. Here, we’ll be covering everything landlords need to know to navigate the ins and outs of ending a lease early while also minimizing the consequences of this kind of action. Whether you're managing a single property or several, knowing how to effectively handle a lease termination is essential for protecting your bottom line.
What Are The Expenses Associated With Breaking A Lease?
So, if you find yourself, as a landlord, needing to break your own lease for whatever reason, it’s important to know that there will be costs involved. In fact, there are several costs you’ll face when taking this path, so let’s dive in and take a look at some of the main ones.
Loss of Rent
One of the most immediate costs involved is the loss of rent. It might seem obvious, but it is something that is going to impact your cash flow if the property sits vacant for a time after the tenant moves out. As such, if you’re responsible for that gap in your rental income, you must have a clear understanding that each month your rental unit is empty, it’s losing money.
An Early Termination Fee
In the same way as lease agreements typically stipulate that tenants pay an early termination fee when breaking the agreement before its end, landlords are usually bound by the same terms. Generally speaking, this fee is 1-2 months' rent, depending on the contract.
Unpaid Rent or Damages
If you choose to break the lease when there are outstanding bills or property damage, these costs can be covered by the security deposit. However, if the deposit doesn’t fully cover these expenses, you may need to pursue further action, such as legal proceedings, to recover the remaining balance.
Advertising and Tenant Screening
There’s no getting around the fact that if you’re not going to live in your property yourself, you’re going to need to put time and effort into finding a replacement tenant. It can be a laborious process that takes time and money, as you’ll need to spend on advertising the property, background checks and tenant screening. On top of that, there could be other fees if you use a property management company to take care of things for you.
Legal and Administrative Fees
In certain circumstances, you could be unlucky and find that breaking a lease leads to legal disputes, especially if the terms of the lease are unclear or the tenant is uncooperative. You may also need to seek legal advice, which again adds to the overall cost of breaking the lease.
Pro Tip: To minimize the cost of vacancy, consider offering incentives like a reduced first month's rent to attract tenants more quickly.
Related: Property Management Fees: How Much Should You Expect to Pay?
How Can You Break Your Lease And Minimize Your Financial Responsibility?
Naturally, from your perspective, the goal for any case of early lease termination is to ensure it doesn’t hit you too hard financially while attempting to stay on the right side of local law and landlord tenant law. Here’s how to reduce the burden when terminating a lease early:
- Review & Enforce Lease Terms - One of the first jobs you’ve got is to carefully check the lease agreement to see if any early termination clauses exist, such as a termination fee. Understanding these terms ensures you are legally protected and can better prepare for any financial obligations or disputes that may arise.
- Retain the Security Deposit (When Appropriate) - If there are outstanding costs present when breaking the lease (such as unpaid rent or property damage), the security deposit can be used to cover these expenses. However, it’s important to document everything and provide tenants with an itemized list of deductions.
- Plan Your Next Steps Carefully - When you decide to break the lease, it needs to be for a very good reason, so you need to have a clear strategy of what you’re going to do with the property after it’s been vacated. As such, your attempts to get new tenants could be accelerated with some kind of financial incentive.
- Seek Legal Advice - As we’ve mentioned already, breaking a lease does present the risk of legal implications, which means that getting legal advice on the matter is a prudent move.
Pro Tip: You need to act quickly to fill the unit while navigating other common challenges. Check out our Rental Management Blog for deeper insights into managing your properties effectively.
For What Reasons Can a Landlord Legally Break a Lease?
Breaking a lease is a big decision for any landlord, and it’s vital to understand the legal grounds you have for making such a move without facing a penalty. So, what are the legal reasons you could have as a landlord for terminating your agreement early?
Property Sale or Personal Use
One of the most common legal reasons a landlord might have to break a lease early is either to sell the property or move back into the rental unit themselves. In many states, landlords are often within their rights to terminate a lease if they or a close family member needs to move into the property. However, local law may require advance notice (typically 30 to 60 days), and this must be explicitly outlined in the lease agreement.
Non-Payment of Rent
A tenant’s failure to pay rent on time is another legal justification for lease termination. If tenants fall behind on rent, landlords can issue a notice to pay rent or quit, which is the first step in legally ending the lease. This helps preserve rental income and ensures the property remains profitable.
Lease Violations
Another reason why you can break a lease agreement is if you can prove your tenants are violating its terms. This could be because of things like illegal activity, damaging the unit or disturbing neighbours on a frequent basis. To handle these situations correctly, it’s important to follow the proper legal steps to avoid complications, and by acting quickly, you can limit the impact on your rental property and reduce costly periods of vacancy.
Property Uninhabitable or Need for Major Repairs
If your property becomes uninhabitable due to damage or necessary repairs, you may again have the right to break a lease. This is typically the case when significant maintenance or renovations are needed, and the property cannot be safely lived in. Clear documentation of damages and efforts to repair the property can help you avoid legal consequences.
Pro Tip: An early termination clause in your lease agreement gives you the flexibility to break the lease if necessary, but you must ensure the tenant understands the terms upfront. Check out our step-by-step guide on how to manage a rental property for more insights.
Related: A Comprehensive Guide for Landlords: Lease Forms
Legal Considerations When Breaking a Lease
When breaking a lease, it’s super important that you adhere to local law, or it’s likely you’ll run into legal disputes. While the reasons for needing to break a lease may vary, understanding the legal framework surrounding early termination is essential. You should consider:
Action | Why? |
|---|---|
Check Local Laws | Different states and municipalities have varying landlord tenant laws. Before moving forward, it’s vital to review these laws to ensure compliance. Some jurisdictions may allow you to break the lease under certain circumstances (such as early lease termination), while others may have restrictions on early termination. |
Read Up on Notice Requirements | In most cases, landlords are required to give a specific notice period, typically ranging from 30 to 60 days, depending on local regulations and the lease agreement. Not providing adequate notice can result in penalties or the tenant remaining in the property longer than expected. |
Document Everything | Legal disputes can arise if your tenant disagrees with the lease termination. To minimize this risk, be transparent with the tenant about your reasons for breaking the lease, as well as keeping records of all communications with the tenant, including written notices and conversations. |
Be Fair With Handling Deposits | When breaking a lease, you are typically responsible for returning the security deposit to the tenant, minus any valid deductions. Be sure to follow local rules regarding the timeline and documentation for returning the deposit. |
If you decide that breaking a lease is the way forward, it's critical to make sure you're fully prepared for any potential fallout. Just be mindful of the financial and legal consequences you might face and take the time to review all relevant laws and guidelines.
Pro Tip: Keep your lease agreements clear and flexible to protect yourself from costly legal disputes and ensure smoother lease terminations.
Enjoy Effortless Lease Management with TenantCloud
Breaking a lease isn’t a decision any landlord takes lightly, but sometimes, it’s unavoidable. As we’ve covered in this article, understanding what’s involved when you break a lease and the legal considerations that come along with it is key to protecting your rental income and avoiding unnecessary disputes.
Whether it’s due to selling the property, moving back in, or needing to resolve tenant issues, keeping yourself up to date and fully informed on your rights and responsibilities helps you minimize the financial strain of this kind of move while staying compliant with landlord tenant law.
Something else that’s here to make lease management simpler is TenantCloud. Offering customizable lease templates that let you include your own early termination clauses to features that help you track tenant communication, manage notices, and document deductions, our platform gives you the tools to handle all your landlord obligations with less stress and greater accuracy.
Interested? Then you should take some time to explore our platform today to see how we can help you manage your property portfolio with confidence. Alternatively, why not speak with our team directly at 1-737-300-9331 to see how TenantCloud can help you?
