Most leases in California are written for initial fixed terms, usually 12 months. Renewal periods are also usually written for a fixed number of months. During these fixed terms, the tenant has agreed to remain in the property and pay rent through a certain date, and the landlord is obligated and required to allow the tenant to remain for that period of time. The only exception is a month-to-month lease which can be terminated with a 30 day notice by either party–a 60 day notice from landlord to tenant if the tenant has been in the property for over a year.
So what happens if it’s November and your lease doesn’t end until the following June 30th, but life circumstances are forcing an early departure from your rental home?
Perhaps you’ve lost your old job and already found a new one, but the new job requires relocation to another city? Sometimes tenants divorce and neither can afford the rent alone, so both have to move. Sometimes tenants are under no financial duress but elect to buy a new home and terminate early, and simply include the early termination costs in the overall financial decision to buy the new home.
There are a number of life circumstances that can cause a tenant to contact us and ask, “What happens if I can’t finish my lease term?”.
This is called Early Termination and is covered by paragraph 30 of the California Association of Realtors Residential Lease Agreement. “In addition to any obligations established by Paragraph 29 (Tenant’s Obligation Upon Vacating Premises), in the event of termination by Tenant prior to completion of the original term of the Agreement, Tenant shall also be responsible for lost Rent, rental commissions, advertising expenses, and painting costs necessary to ready Premises for re-rental. Landlord may withhold any such amounts from Tenant’s security deposit.”
When a Tenant “skips” and simply moves out and stops paying rent, it results in legal action, damage to the tenant’s credit report, and ultimately the account being placed for collection. In other words, the worst financial and credit consequences possible are realized, and the price is paid for years to come—which can affect the tenant’s ability to be qualified for another rental.
In a nut shell, when you want to move early and wish to do so in a way that follows the lease agreement and avoids negative consequences, all of the costs of your decision to terminate early must be absorbed and paid by you, not the property owner. This is a simple concept for most to understand. The owner of your rental has no obligation or desire to subsidize your moving costs by absorbing lost rent and other turnover expenses created by your early departure, so all of the financial consequences of your decision to leave early belong to you. The following steps must happen if you are a Silver Creek Valley Properties tenant:
1) You must provide written notice of your intent to terminate early, including a move-out date.
2) Your written termination notice must include payment of the reletting fee listed in paragraph 28 of your lease agreement. The reletting fee is typically 4% of your remaining lease term (but no less than $395) via a check made out the Property Management Company, and there can be an additional $200+ in real estate commissions if the new tenant comes from another agent who found the advertisement on the MLS (Multiple Listing Service). For example, if your lease term is one year at $3,500/mo, and you decide to do an early move out by the 6th month, you have 6 months left on your term. $3,500 x 6 = $21,000. $21,000 x 4% = $840 due to the Property Management Company.
3) You must continue paying rent each month, until a replacement tenant is found and starts paying rent for you.
4) You must continue your utility services after vacating, until a new tenant moves in.
5) You must arrange for lawn service (if applicable) after you vacate, until a new tenant moves in.
6) You are responsible for any cleaning fees associated with the lease, including a re-key fee. Since you are voluntarily doing an Early Move Out, it is your responsibility to pay for an early re-key of the home, as the owner is obligated to re-key the property after each tenant per the property management agreement the Company has with the owner.
8) Your security deposit will be returned after a new tenant moves in and takes over your lease term.
7) All other terms and conditions of your lease agreement must continue to be met.
Once this is accomplished, you leave with a good rental history, receive your deposit refund (subject to any deductions according to the contract), and have completed your lease agreement on good terms. You haven’t technically “broken” the lease, but instead satisfied the requirements of Early Termination. It should be noted, however, that you are still legally obligated until the end of your remaining lease term in the event your replacement tenant defaults.
Frequently Asked Questions:
Q: Can I wait until you find a tenant to provide notice?
A: No. We won’t initiate any efforts to locate a replacement tenant until/unless we have written notice to vacate with a move-out date. Understand that we don’t even have the legal right to promise the property to a new tenant if we haven’t received written notice from you, so your status is either one of 100% staying, or 100% leaving. There is no “maybe” or in between allowed and we can’t market a property without a defined availability date for move-in.
Q: I don’t want to pay the reletting fee. Do I really have to, or can I pay it later?
A: You already agreed to pay it when you signed your lease. You are simply keeping an agreement you already made. It must be paid up front, as agreed in the lease.
Q: If I know someone who wants to rent the house, can I refer them to you?
A: Yes, of course. They must submit an application and qualify the same as any tenant. You may not “market” the house though, once we begin marketing efforts. You can tell your friends and co-workers about it and try to help find a tenant, but you can’t, for example, put your own sign in the yard.
Q: Why should I have to keep paying rent after I move out?
A: That’s the agreement you made when signing the lease. Failure to pay rent will represent a default of the lease. Continuing to pay rent allows us to keep sending the owner their monthly proceeds and it keeps you in compliance with your lease agreement and in good standing, which is the goal of paragraph 30 of your lease agreement.
Q: How long will it take to find a new tenant?
A: We normally locate a new tenant within 30 days, sometimes sooner but it could also take longer depending on the time of year, market conditions, how well the house shows, and other variables.
Q: What if I only have 2 months remaining on my lease? Can I avoid the Early Termination fees?
A: Yes. If you have less than 3 months remaining on your lease, you’re probably better off finishing your lease or paying out your remaining rent in full rather than terminating early. When a tenant pays the final month of a lease term and also notifies us in writing they will be departing by a date sooner than the last day of the lease, we will market the property as available on the earlier date. You will still have to maintain utilities and yard care per your lease agreement through the final day of the lease, but if a new tenant is located and moves in prior to the end of your lease term, you’ll receive a rent rebate and will have successfully completed your lease term without having to pay a reletting fee.
If you have more than 3 months remaining on your lease term, you’re probably better off paying the reletting fee though and letting us find a replacement tenant.
Special thanks to Steve Crossland, a TX NARPM Member.