How to Handle Early Termination

There may come a time when one of your tenants requests early termination. Whether you’re dealing with that now, or just unsure of what to do should that arise, it’s always smart to be prepared for these unexpected events. Although they have signed a binding contract to pay rent until the move-out date, there are a variety of situations that allow tenants to break a lease early. The reason for an early termination can affect your legal options as a landlord and determine how you should handle the situation.

Reasons for Early Termination

Under California Law, there are a few situations in which tenants can formally break a lease with no further rent obligations following the notice period. These include:

Active Military Duty: The War and National Service Members Civil Relief Act allows tenants to break their lease early if they are entering active military duty in a variety of services. This law applies to duties in the National Guard, Public Health Service, NOAA corps, and armed forces that are more than 50 miles away. Under these circumstances, tenants must give 30 days notice of early termination, and are thereafter not responsible for rent payments.

Uninhabitable Rental Property: If a California rental property does not meet the state’s housing codes or is considered “uninhabitable”, the tenant may legally break the lease with no further rent obligations. This usually only occurs after major property issues or damage goes without repair, such as electric, gas, or plumbing problems, leaks in the roof or walls, or serious health hazards. To avoid this situation, maintain timely upkeep with your property and keep detailed records of the property status and all repair work.

Intrusion of Privacy: In protection of tenant privacy, California Law requires landlords to give 24 hours notice before entering a rental property. Tenants may be able to terminate a lease early if privacy rights are violated repeatedly. They also are required to provide a formal written complaint of privacy violation beforehand. 

Domestic Violence: With the proper paperwork, victims of domestic violence, stalking, abuse, or sexual assault may break a lease early. The tenant will then face no rent obligations after 14 days following the early termination notice.

In these scenarios, you may not have any options to reject an early termination or charge an early termination fee. There are other instances where early termination may be the most convenient course of action for both you and the tenant, such as:

Loss of Employment: If the tenant no longer has sufficient income to pay rent, granting  an early termination request may be a simpler option compared to carrying out the eviction process. Consider charging a reasonable early termination fee to cover your losses and allowing the tenant to break the lease.

Divorce, Illness, Job Transfer: Unexpected events and emergencies such as a serious illness, a divorce, or a mandatory job transfer can be common reasons for an early termination request. Similarly to a loss of employment, granting early termination in these situations can be more time and cost-effective than evicting tenants. Additionally, tenants will be frustrated if they are denied an early termination and may be more likely to take less care of the property or leave damage.

In these situations, tenants are usually responsible for the remaining rent payments through the duration of the lease when the property remains vacant. However, you are legally obligated to actively search for new tenants.

Mitigating Damages

In this context, “mitigating damages” refers to finding a new tenant now that your current renter has vacated the property. Regardless of the reason for early termination, it is the landlord’s responsibility and obligation to find a new tenant. 

It is not advised to allow the tenant to find a sublet to stay in the property through the duration of the lease. Of course, any new tenants should be required to go through the screening process and held to the same standard as the original tenant. Even if you screen an informal sublet, having the original tenant still on the lease can complicate the situation and make liability issues confusing. To keep it simple for your protection, it is best to just finalize early termination and have the new tenant sign a new lease.

Prepare for Early Termination

To avoid being taken off guard when a tenant requests to break a lease, take these precautions and tips when early termination occurs:

Write a Lease Clause: In order to avoid confusion and frustration in the event of an early termination request, your lease should include an early termination of lease clause. Work with an attorney to develop an early termination clause that includes requirements such as minimum notice, early termination fee, written notice requirements, and more. This allows you to expect certain procedures during early termination. At Utopia Management, we offer professional advice and consultations for lease development.

Require a Termination of Lease Agreement: If a tenant requests to break a lease, require a written and signed notice and keep it with your records. Before the tenant physically vacates, confirm that you’ve received all required payments.

Don’t Seize the Security Deposit for Rent: Just because a tenant is vacating early does not necessarily mean you should take the security deposit to cover rent. You should continue the formal process of property inspection before seizing the security deposit, so you can determine if the security deposit funds will need to go towards repairs or cleaning.

Above all, a professional property management company like us at Utopia will help you through the entire early termination process. We can consult with you to determine the best options for you as a landlord, to save you time and money.

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