“Things To Know About Termination Of Lease” written by Mike Marko
It’s important for a property manager to clearly understand what a termination of lease is.
A termination of lease can happen in every rental property business. It usually brings several costly expenses and problems to the property manager, rental business, and the tenants.
That’s why property managers generally do their best to prevent terminations of lease from happening.
But no matter how hard you try preventing a termination of lease, it might still happen at some point. That’s because several of the causes for a termination of lease are out of your hands.
The only thing that you can do with a termination of lease, then, is to handle it properly to minimize the damage it causes.
With that said, today’s blog post will be about things you need to know about the termination of lease. Having a clear understanding of what such terminations involve can be of help to you.
If one does occur for one of your properties, you will be better able to prevent any major damages or loss to your rental property business.
Understanding the Termination of Lease
As I just said, property managers need to understand everything about the termination of lease. This can help them manage their rental property businesses more effectively.
You’re probably wondering what can even go wrong if a termination of lease happens with one of your tenants. A lot of things, actually, especially if you’re uninformed about such terminations.
Mishandling the situation in case of a termination of lease could result in lawsuits, major loss of income, and a bad reputation. And that could cost you your rental property business.
So to help you avoid those problems, let’s now start talking about the termination of lease.
What Is the Termination of Lease?
A termination of lease occurs when a tenancy is ended before its actual end date (as set by the leasing contract).
This usually happens if either the property manager or tenant violates the lease agreement.
That said, there are other reasons a termination of lease may occur.
For example, a tenant may opt for a termination of lease if something happens at home or at work that requires him to move to a new location right away.
The same may be true of tenants who have to move to new locations for health or family reasons.
When this happens, the termination of lease tends to be quite amicable. It’s also the reason rental laws permit termination of lease as an option to both parties in a rental or leasing agreement.
There are still laws governing the termination of lease process, however. For instance, property managers aren’t allowed to terminate a tenancy for reasons that are discriminatory or retaliatory.
Discrimination laws are governed by fair housing laws in your area. It’s better to check those before you terminate a tenancy, at least if you’re the one initiating the termination of lease.
If someone suspects you of initiating a termination of lease for discriminatory reasons, you can actually be sued in most states. So you have to be wary of your motivations for asking a tenant to move out.
But to give you an idea about it, here are some of the valid reasons for terminating a lease in most states.
Valid Reasons for Termination of Lease
Most states do not allow property managers to terminate a lease without a valid reason. In most of them, property managers can only terminate a tenancy if the tenant does the following:
- Fails to pay rent,
- Causes significant damage to the property,
- Violates a clause in the lease or rental agreement, or
- Violates a responsibility imposed by law.
You can terminate the tenancy if the tenant does any of the actions stated above. But before you remove them from their rented property, make sure to send an eviction notice first.
Sending an Eviction Notice
Rental laws require property managers to send an eviction notice first before proceeding to the termination of lease.
The notice that you’ll send to the tenant should ask them to do one of the following. It depends on the situation which of these you request.
- Pay Rent or Quit – The tenant must pay their unpaid rent in order to stay on the property. Usually, they’re required to pay it within three to five days of the notice. If they can’t do that or refuse to do that, their only option becomes to vacate the rental unit.
- Cure or Quit – The tenant must correct the violation they made on the lease or rental agreement within a certain time. For example, if the cause for termination of lease is the tenant’s decision to sublet part of the property without the property manager’s approval, that subleasing agreement must be ended and the person to whom the tenant sublet should move out.
- Unconditional Quit -The tenant must move out without the opportunity to fix the violation or pay the rent. This is typically the request made in the termination of lease when the cause of termination is very grave or irremediable. For example, if the tenant committed a felony while on the premises, that’s usually sufficient reason for a property manager to issue a notice of eviction.
Make sure that you will serve the notice according to the rental laws in your area. If you’re the one who will serve the notice, you must bring a witness to substantiate that you did.
If your tenant fails to follow what’s written on the eviction letter, that’s when you can proceed with the eviction process.
Proper Way of Removing a Tenant
A termination of lease requires you to file an eviction lawsuit if you’ve initiated it.
To begin the process, you must file a complaint with the court. Usually, you’ll pay a fee for the court hearing.
After completing the paperwork, the clerk will give you a hearing date. Make sure to prepare the following documents before the hearing date:
- Lease agreement,
- Eviction notice,
- Bank statements that show the missing rent payments or returned checks, and
- Records of all communication between you and the tenant.
Presenting those documents helps in supporting your claims for the termination of lease. This increases your chances of winning the eviction.
You and your tenant have the chance to support and defend the eviction on your hearing date. The judge will then decide who wins the case.
If you win the case, the court will give you the instructions of how you’re going to evict the tenant.
Be sure to follow these instructions to the letter. They’re legally mandated, which means you can get into serious trouble if you violate them.
Usually, the tenant has 48 hours to move out of the property. During that time, you can’t heckle or nag them into moving out early — that could land you into hot water because the tenant may file a counter-complaint.
That having been said, if the tenant refuses to leave after the given time, you can get help from a law enforcement officers to remove them from the premises.
Keep in mind that you can file an unlawful detainer action if the tenant continues to use the rented property even after they receive the termination notice.
Things to Do After Termination of Lease
You need to start inspecting the property right after evicting the tenant. You can use the tenant’s security deposit to fix any damage and returning the property to its original condition.
Of course, that’s assuming you specified that the security deposit can be used for that purpose in your original contract with the tenant.
If you use the security deposit for something other than what the contract states you can use it for, you could get a lawsuit on your hands!
So just to make sure, bring out your copy of the original leasing agreement and check the section on security deposits.
You want to see if the repairs necessary to the property after the tenant’s usage can be covered by his security deposit or not.
If the tenant’s security deposit isn’t enough to fix the damage and loss incurred by the termination of lease, you can also charge a termination fee.
Property managers are allowed to do this to mitigate the damage of a lease break.
You also need to send a notice to the tenant about what happened to their security deposit, though. If the security deposit isn’t used up, you still need to send it back to the tenant.
But if the entire security deposit is spent, you’re required to send an itemized statement to the tenant. This should include a list of where and how the security deposit was used.
I generally advise property managers to make such a list whether or not the security deposit is used up in its entirety.
That’s because it helps to prevent misunderstanding and charges of misuse of funds later.
Final Thoughts on Termination of Lease
In this blog post, I talked about the termination of lease. The termination of lease is what happens when a tenancy is ended before its actual end date.
A termination of lease can occur for any number of reasons. It may also be initiated by either the tenant or the property manager.
When it’s initiated by the property manager, it’s usually due to some undesirable act taken by the tenant.
For instance, this happens if the tenant violates the lease agreement or violates a responsibility imposed by law.
But even if the tenant clearly made a violation, you can’t just remove them from their rented property. You still need to follow the eviction process in your area.
That includes filing a case for eviction and going to court.
If you win the eviction, the court will give you the instructions of how you’re going to evict the tenant.
After that, you can start inspecting the rented property to see where you’re going to use the security deposit of the tenant. Remember to stick to the clauses concerning security deposit use in your original contract, by the way.
Remember too to return the security deposit to the tenant if it’s not entirely used.
If you have more questions about the termination of lease, leave them in the comments below.
If you need help marketing your business online then check out IM Consultant Services.
Disclaimer: This commentary is a matter of opinion provided for general information purposes only and is not intended to be taken as investment or trading advice under any circumstances. Information and analysis above are derived from sources and utilizing methods believed to be reliable, but we cannot accept responsibility for any losses any person may incur as a result of this analysis. Individuals should consult with their personal financial advisers. By using this web site or any information contained in it, the user specifically and expressly agrees that no advisor-client relationship is created between said user and any author, owner, executive, or principal of this web site by either use of this web site, or by any information, product, or service offered by or on this web site. No express or implied guarantees or warranties as to investment or trading results are made, and any perceived insinuations of such are hereby expressly disclaimed.