Early Lease Termination for Owners: Part 1

Life Happens

Life happens, but it rarely happens to conveniently coincide with the end of a lease. Your tenant needs to terminate their lease early, but signed a legal document with binding terms, including to pay rent through the end of the lease. However, as much as the lease serves to protect the landlord, there are laws in place to protect tenants as well. It’s important for property owners or managers (and renters) to know how to handle these situations.

Tenants want to break their leases for a plethora reasons—personal, professional, or because they believe the landlord breached the lease. Depending on the reason, the landlord might be legally bound to release the tenant without damages (so long as the tenant follows protocol). In many situations, it makes sense to be compassionate and work with the tenant to find a solution. It is important to note that if the tenant found an upgrade, is moving in with their partner, buying a home, or relocating out of town, the property owner is not on the hook to release them early. 

In Colorado Springs, due to the heavy military presence, it is not uncommon for renters to terminate their lease early due to receiving military orders. SCRA, or the Servicemembers Civil Relief Act, gives servicemembers the ability to terminate their lease without repercussions. It is important for landlords to know that servicemember only need to deliver written notice to the landlord along with a copy of the military orders to enter active duty, deploy or PCS (oral notice is not sufficient), in order to meet the requirements for the SCRA.

Searching for a New Tenant

In most states the property owner or property manager is obligated to search for a new tenant when the current tenant chooses to terminate a lease. Likewise, the tenant is responsible for paying rent while the property owner is searching for a replacement. A landlord cannot legally hold the tenant to the terms of the lease, i.e. collect rent, while the unit passively sits vacant until the end of the lease. They can, however, charge rent until a replacement is found. Once the unit is filled, the previous tenant is off the hook (collecting double rent payments is illegal).

Never allow the tenant to make commitments on your behalf by informally finding a sublet. It is important to maintain control over who you allow to live in the unit. If the tenant offers you a potential replacement, screen the applicants as you would for any anyone you would find on your own.

Early Termination of Lease Clause

A common solution to streamline early termination is to include an early termination clause in the lease. It allows owners to protect themselves by collecting a fee, typically two months’ rent (more would likely be considered excessive in court) to cover the empty unit until a new renter is found, while also giving the tenant a legal course to exit the lease.

Because owners are allowed to continue charging tenants for rent until a replacement is found, tenants often find it more attractive to pay a non-refundable fee to end the relationship and vacate. This benefits the tenant, who is not on the hook for the sum of the lease, as well as the owner, who does not have to refund the tenant a prorated amount for the overlap. However, if the owner ends up searching for a new tenant longer than two months, they have no legal recourse left against the tenant to recuperate any loss due to the vacancy. 

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