property manager Dallas Tx

When A Tenant Wants to End Their Lease Prematurely: What Are Your Options?

Effective property management in Dallas requires keeping vacancies down to a minimum. That means recruiting responsible tenants for your properties. Good tenants should pay rent on time and take care of the units they are using. It is also very important that they notify you ahead of lease expiry if they want to move out. This is crucial in order for you to recruit a viable replacement before a unit falls vacant. In practice, however, not every tenant will stay put and see out their lease. Some might opt to move out mid-term, and therefore terminate the lease prematurely.

Why Would a Tenant Want to End their Lease Early?

One might wish to move out due to the lack of fulfillment; perhaps your property didn’t meet their expectations. Or maybe they feel you are under-performing on your end (i.e. not following your duties as a landlord. In other cases, however, a dutiful renter could be driven by circumstances beyond their control:

Profession: A tenant could be forced to reconsider their housing situation due to an impending job loss. One could also want to move out because they’ve been summoned for military duty or invited to take up a new position out of town/state.

Divorce: Rental payments can become a major source of contention when a couple decides to split up. In the end, early termination might be the only practical option for everyone.

Other personal reasons: Situations such as domestic assault, stalking, illness, and bereavement can all be reasons why a tenant may feel the need to get out of their lease as soon as they can.

There’s plenty of other good reasons why a dutiful renter — one you thoroughly screened to ensure their viability — would want to vacate mid-lease. But that doesn’t make your situation any more tenable, does it? You’ll be left with a void to fill, and your annual income will likely fall short of the original target.

On the other hand, early termination is practically unavoidable in the rental property business. So it behooves you to prepare for it in advance. That’s best achieved by including a clause in your lease, but let’s first see what the law has to say.

You Have a Duty to Mitigate

As per the lease agreement, the tenant is contractually obliged to pay rent for the entire term, but that doesn’t mean you can bind them to the same till the lease runs out. The law requires you to recruit a new renter to alleviate the loss resulting from vacancy — or “mitigate damages” as legally defined. This holds even if a tenant decides to terminate in the off-season, or when you have a tight schedule. You must still take reasonable steps to re-rent (i.e. to market the unit, hold viewings, etc).

Nonetheless, you are allowed to continue collecting rent from the current renter while you’re searching for a replacement. It’s only after you successfully recruit a replacement that the current tenant will be off the hook. For that matter, the duty to mitigate doesn’t require you to forego your screening criteria — you’re fully within your rights to go the whole nine yards here. And neither are you obliged to give special priority to the unit or lower the rent for the outgoing tenant’s sake.

Seal it in the Lease

While the law clearly defines obligations on both sides in the event of premature annulment, the process can still be attritive. So, once again, it’s in your best interest to have an early termination clause in the paperwork from the get-go. This provides renters an easy way out while still protecting your bottom line.

The clause should specify how long of a notice period a tenant should give to trigger early termination. Also crucial is the early termination fee — an amount for which they can break away from their obligations. This should cover the cost of recruiting a new tenant and the rent you stand to forfeit (typically two month’s worth).

Be Pragmatic

It’s worth remembering that your relationships with renters (and consequently reputation) matter just as much as your bottom line. As such, your early annulment clause will have a few limitations in practice:

– In the case of assault, domestic violence, divorce, illness, or death of a family member, exercise compassion and offer some leeway.

– A tenant losing their job means they might not be able to pay rent (or even the termination fee). As long as they notify you early enough, you can let them go without repercussions.

– For active service deployment, the tenant should give a 30-day notice; you will want to forfeit the charge for obvious reasons.

These scenarios aside, you should remind renters who wish to terminate their leases early of their contractual commitments (and the possibility to buy one’s way out). Remember that you’re under no obligation to put your position at risk for the tenant’s benefit — don’t allow them to sublease the unit under any circumstances. They could refer prospects for you to consider, but the decision on who lives in your properties should rest squarely in your hands. It’s not easy being a landlord. If you feel that the responsibilities are just too much to handle, let the professionals help. Specialized Property Management in Dallas can help you, as a landlord, keep everything under control. Contact Us online or call 214-233-7572 to get a quote today!