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Early Lease Termination Fee vs. Unpaid Lease Rent Balance

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  • Early Lease Termination Fee vs. Unpaid Lease Rent Balance

    I am helping a friend who finds they must leave their rental due to relocation for a job in one month. They are under a lease with 6 months left to go. Their rent is $1200/month.

    It's my understanding that the law requires them to be liable for the remaining rent balance until the end of their lease term if they choose to terminate the lease early. That amount can be reduced if a replacement tenant can be found sooner than that, because the LL can't double dip (get rent from my friend once the place has been re-rented).

    My friend has informed me that the lease she signed has an early termination clause that allows a one-time payment of $3600, the equivalent of 3 months' rent, and that ends her lease obligation altogether. What happens if she pays the $3600, and the LL finds another tenant sooner than 3 months? If she didn't pay the early termination fee, she would be liable for a lesser amount of rent. Could she sue for the return of any overpayment here? Or would she be out the additional money because it was considered a fee and not assessed as unpaid rent?
    "If it ain't in writing, it never happened."
    "A lack of planning on your part does not constitute an emergency on my part."
    "You can never make the same mistake twice, because the second time you make it, it's not a mistake, but a CHOICE."

  • #2
    Re: Early Lease Termination Fee vs. Unpaid Lease Rent Balance

    Good question. If the tenant terminates and the LL finds another tenant, the tenant's obligation for rent normally ends when that tenant signs a new lease and takes occupancy. But there are many variations on this.
    - If the tenant just leaves, and a new tenant signs a lease, there is no further obligation past the costs to find that tenant and get him to sign.
    -The LL could also sublease the unit under the tenant's original lease. If the sub-tenant moves out before that six months are over, the original tenant is still on the hook until lease end. This usually requires the tenant's permission. (Don't give it!)
    -The LL may be unable to find a new tenant soon. That leaves the original tenant liable for not only rent until the unit is re-rented, but advertising costs, agent fees if he uses one to find a new tenant, and any other non-reimbursed costs (like credit check fees for applicants). The reasoning behind this is that since it was the tenant's fault that the lease was broken, the LL must remain whole (undamaged financially). The LL may recover any and all costs it takes to re-rent the unit. These can be substantial! (Have you checked advertising costs lately? And agent fees usually run about one month's rent.)
    -The tenant could pay a termination fee. This releases the tenant immediately from any and all other costs to re-rent. The tenant is not liable for advertising or any other costs. However, if the unit is re-rented during that time, the tenant does not get this money back. It is a fee to be released from obligation. This fee usually is about 2 months of rent. If you pay this, get a signed release! Paying the fee stops the LL from suing the tenant for any of these costs. This will keep the tenant's credit intact. A suit will harm the tenant's credit since it appears to be a bad debt and is counted as such. (Your score will drop!) You don't want to harm your credit over this, so make sure the LL doesn't try to sue. If you don't pay a fee, be cooperative in continuing to pay him.

    It is up to the tenant whether he wants to gamble on the LL being able to find a tenant quickly or not. In winter months in northern climates, it can take some time to re-rent. No one is moving now - it's cold, snowing, and miserable to pack and carry all those things in and out. In southern climates, it may be easier. So the tenant needs to evaluate his or her own market and decide how quickly he or she thinks that unit will re-rent.

    Comment


    • #3
      Re: Early Lease Termination Fee vs. Unpaid Lease Rent Balance

      I have a follow up question to the previous answer:

      In the last bullet, you say
      The tenant could pay a termination fee. This releases the tenant immediately from any and all other costs to re-rent. The tenant is not liable for advertising or any other costs. However, if the unit is re-rented during that time, the tenant does not get this money back. It is a fee to be released from obligation.
      Here is my question:
      Can a contract require that a tenant pay a termination fee AND still remain liable for the remaining months in the contract?

      There is an early termination clause in my contract like this:
      1) give XX day notice, AND
      2) pay termination fee of X months rent, AND
      3) tenant continues to pay all rent until the end date of the least, or until a new tenant is approved and the new lease takes affect

      So, what is the point of (1) and (2) when you consider (3)? If I pay the termination fee, am I required to still fulfill #3? If so, why?

      And do you need a written release of anything based on the termination fee? Wouldn't cashing the termination fee check be considered implicit acceptance of it?

      Thanks.

      Comment

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