Strategies for Landlords When a Tenant Wants to End a Lease Early

Every landlord will eventually encounter a tenant who wants to end their lease before it expires. Whether it’s the result of a job transfer, financial hardship, family issues, or another big life event, early lease termination can create a financial challenge. 

The solution is to approach the situation professionally and strategically. By planning ahead for this potential situation, you can reduce vacancy time and protect your rental income.

1. Hire a property management company

Handling an early lease termination requires following federal, state, and local landlord-tenant laws to the letter. It also requires managing an unexpected vacancy. A property management company can help you handle the process smoothly. For example, a professional property manager will:

•     Manage legal compliance. Professional property managers stay on top of current housing laws applicable to local landlords. Making just one small mistake regarding required notices or procedures can expose you to legal liability. Having a professional oversee the process ensures you remain compliant. 
•     Reduce vacancy time. A lease terminated early will result in an unexpected vacancy. When you work with a property manager, they’ll start marketing the property the moment your tenant gives notice. This will allow you to fill that vacancy much faster and reduce the disruption to your cash flow. 
•     Handle documentation. Every lease termination requires paperwork, like notices, move-out inspections, security deposit records, and a settlement agreement. A property manager will already have a system for generating and maintaining these records.  
•     Maintain good tenant relations. Throughout the process, it’s critical to maintain good relations with your tenant. Property managers know how to work with tenants to reduce the chances of escalated emotions.
  
  ·     Screen potential replacements. When you have an unexpected vacancy, it’s critical to find a replacement tenant fast. Professional property managers have effective systems for screening and approving qualified applicants.

Hiring a professional property management team will make the lease termination process easier while saving you from making costly legal mistakes.

2. Know why a tenant wants to leave early

When you first get notice that a tenant wants to end their lease early, it’s important to understand their reason. The reason they provide will influence your perception of the situation and can define your legal obligations.

•     Employment relocation. Sometimes a new job requires moving across the state or country. Other times, people find opportunities to live in a more affordable area, which is common for remote workers. With the exception of military personnel, relocating for a job doesn’t shift any obligation to the landlord. However, military personnel can terminate a lease early without paying early termination fees if they receive a Permanent Change of Station (PCS) order or are deployed for a minimum of 90 days. Most states require a 30-day notice, but some states have shorter notice requirements. 
•     Financial changes. Some tenants want to end a lease early to avoid falling behind on payments following a job loss, reduced income, or major unexpected expenses.  
•     Family circumstances. For many people, marriage, divorce, and caregiving responsibilities change their housing needs without warning.  
•     Safety concerns. Sometimes tenants don’t feel safe where they live. In some situations, a court might grant a tenant the right to terminate a lease early if the safety concern involves another tenant – or violates habitability laws – and goes unaddressed by the landlord. In other situations, the tenant might have the legal right to terminate their lease early if they’re a victim of domestic violence, stalking, or harassment.

Understanding why a tenant wants to leave helps you understand your legal responsibilities and make informed decisions about how flexible you want to be with the situation.

3. Review the lease first

Before you make any decisions or take any actions, review your lease agreement with the tenant who wants to end their lease early. Check the early termination clause to verify how tenants can request an early end to their lease. For example, review the requirements for giving notice and paying fees. While you can hold your tenant accountable for following the requirements, you also need to follow what’s in your lease.

Check to see if the lease outlines any special conditions, like buyout provisions that can influence the situation. Once you know what you and your tenant have agreed to, then you can create a plan for moving forward based on that framework.

4. Communicate professionally

Clear communication can make the difference between a smooth situation and a dispute. Respond to your tenant quickly and professionally. Delayed responses can add to a tenant’s frustration and might cause them to be less cooperative.

It’s critical to keep all communications in writing so you have documentation regarding all agreements and timelines discussed outside of the written lease. Most importantly, stay objective and don’t get emotional. Focus on the terms of the lease and practical solutions. Professional communication is the best way to maintain a positive relationship and protect your business interests.

5. Find a replacement tenant

As soon as you know your tenant wants to end their lease early, start advertising the property with local listing services. Schedule flexible showings at convenient times to get more interested prospects to tour the property, and screen all applications to high standards before approving anyone. 

6. Reduce the impact of future early lease terminations

While you can’t prevent all situations, you can lessen the impact of some early termination situations. For example, add detailed termination clauses to your lease to create predictable outcomes and reduce uncertainty. When you include buyout provisions, you’ll give tenants a clear idea of what’s required to end the lease while protecting yourself from losses. Ultimately, better tenant screening will identify people who are more likely to stay long-term.

Create a practical lease termination process

Early lease termination is part of owning property, but it doesn’t have to disrupt your finances. A property management company can provide you with support throughout the process, from handling notices to screening replacement tenants. A property manager will also help you stay compliant with landlord-tenant laws. With a strong lease and defined buyout provisions, you can minimize vacancies and keep your rental business running smoothly.

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Tiffany Ferdus

Director of Operations at Green Residential

Tiffany is the Director of Operations at Green Residential.She has been in the multifamily property management industry for 7 years, serving most recently as an Area Manager in Nashville, TN. Tiffany specializes in all aspects of the property management process.

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