In a perfect world, every tenant and every lease term would be spotless.
No issues, no surprises, just year after pleasantly uneventful year.
But alas, tenants do sometimes– and almost always unexpectedly– request early termination of their lease agreements.
And, other times, a difficult tenant causes you to have no other choice but to do the same.
Early termination is, unfortunately, just a part of being a landlord.
A small percentage of tenants will terminate their leases early, and when that happens, you’ll want to know what your options are so that you’re prepared.
For that reason, we put together this straightforward guide on what to do if your tenant terminates their lease early.
But before moving on, if you’re just looking for a simple lease termination letter template, download that and more in the DoorLoop resource center for all 50 states:
Why might a tenant terminate early?
First, let’s talk about reasons why a tenant might terminate early.
This is important to think about to understand more about what might be going on with your tenant.
But more importantly, in most states there are legitimate reasons for terminating a lease that you should know.
Here they are:
1. Losing a job
One of, if not the most, common, losing a job is a serious financial event.
In the case of job loss, the tenant may need to let go of their lease because they can no longer meet the financial obligation.
While it’s never fun to deal with an early termination, it will be much more costly trying to hold onto the tenant and then pursuing an eviction later.
Instead, consider adding an early termination fee to your new lease agreement to make up for the loss replacing the tenant.
2. Non-livable housing
There are a number of things that you as the landlord can do to allow the tenant to rightfully claim early termination, the most important is making sure the property is deemed livable housing.
Virtually every state has laws ensuring that tenants live in a clean and safe environment. If they don’t, they can rightfully terminate their lease.
That includes things like:
- Heater if in a cold climate
- Hot water heater
- Working roof that keeps out the elements
- Proper floors and walls that aren’t falling apart
- No severe health hazards such as mold or lead
It’s important to make sure you’re not in violation of this not only because it’s the right thing to provide a proper place to live for your tenant.
It’s also important because if you don’t, in most states your client can claim the property unlivable and rightfully terminate their lease without owing any of the remaining rent balance.
3. Major financial challenges such as illness, divorce, or the death of a loved one
Similar to losing a job, other events like becoming sick or a divorce can heavily impact you financially.
Some or all of these events can be considered valid reasons for requesting an early lease termination depending on the state, though they typically aren’t.
Still, you may want to as holding onto the tenant could be much more taxing financially than taking the early termination.
4. Military duty
Military duty as a valid reason for lease termination is written into federal law via the War and National Service Members Civil Relief Act.
Said service member simply needs to give 30-day notice and they’re allowed to exit the property without remaining rent obligation.
5. Domestic abuse
Domestic abuse and violence are another event-related item that can be a legitimate reason for terminating a lease written into many state’s laws.
This is one of a few situations as well where your duty as a landlord to provide a safe environment to live comes into play as well.
So, while your state law may or may not have something detailed about your tenant’s exact situation, you may still want to do what you can to let the tenant move without the hassle of a penalty.
Tenant early termination
Now, let’s talk about what to do in the event that your tenant terminates their lease agreement early.
Specifically, how to mitigate the sudden loss of a tenant.
This won’t help you immediately, but taking these steps will ensure that you’re not caught off guard in the future, or are better prepared for it:
1. Properly screen applicants
While there is nothing you can do to guarantee that tenants are responsible about how they leave their lease, properly screening tenants does make it more likely that they will be responsible.
2. Add an early termination clause to your lease agreement
An early termination clause simply details your policy for when a tenant wants to terminate a lease early.
That most notably includes notes on:
- Notice period
- Early termination fee
- And written notice of termination, for liability reasons
3. Add a buyout option while you’re at it
Buyout in this case refers to the ability for the tenant to pay a portion of the remainder of their lease early to terminate their lease.
Typically, this fee is around two month’s rent.
4. Review the lease during signing
First, let’s start from the top.
It’s easy to want to get the signing over and done with quickly, but if you don’t take a minute to read through the lease with your tenant, chances are they never will either.
And if they don’t, they’ll have no idea about your early termination or eviction policies.
The better they understand those, the more likely they are to want to follow them to not incur extra expense.
As a result, you end up with less headache and reduced chance of financial loss.
Looking for an early termination notice template to send to your tenant?
While it’s not fun to think about, sometimes your tenants do surprise you with early termination of their lease agreement.
And, sometimes, the tenant’s behavior causes you to be the one to want to termate early.
When that’s the case, you can use this early termination of lease template to notify your tenant (example below):
- Free Early Lease Termination Letter
- And download countless landlord forms and documents on the DoorLoop blog: Real Estate Rental Form Templates for Landlords & Prop Managers