Tenant Breaking a Lease - penalize or just let him go?

[Nir]

Hi All,

A tenant who moved in and signed a one year Lease 3 months ago, wants to leave in 3 months - half year before end of the Lease term.
He explained that he wants to end it earlier because he will have less money than he expected and will not be able to continue paying the rent if he stays longer. He added it is related to the fact he lost custody of his child and therefore will not be getting child benefits... bla bla..

My question is would you just let him leave without any penalty or expect him to compensate you for leaving early/breaking the lease?

I guess if he still had the right to give 60 days notice even if he signed a one year lease, then no additional penalty would be allowed(?)

THANKS.

 

[TomB]

Don`t know about Ontario but in B.C. a landlord cannot charge a tenant this fee unless it is supported by related expenses or costs, regardless of what the lease agreement says (ResTenBC overrides the lease in this case). So, you can charge for advertising costs, loss of rental income, etc. as long as it is supported. So if you had someone new move in immediately after, for the same rent, and without having to advertise, then it would be pretty difficult to charge anything.


QUOTE (investmart @ Mar 21 2010, 12:47 PM) Hi All,

A tenant who moved in and signed a one year Lease 3 months ago, wants to leave in 3 months - half year before end of the Lease term.
He explained that he wants to end it earlier because he will have less money than he expected and will not be able to continue paying the rent if he stays longer. He added it is related to the fact he lost custody of his child and therefore will not be getting child benefits... bla bla..

My question is would you just let him leave without any penalty or expect him to compensate you for leaving early/breaking the lease?

I guess if he still had the right to give 60 days notice even if he signed a one year lease, then no additional penalty would be allowed(?)

THANKS.

 

[JimWhitelaw]

First, what do the terms of your lease say about termination? Double check what terms YOU agreed to when he signed the lease. The sample lease doc available here on myreinspace (at least the one for Alberta) lets a tenant break the lease on 30 or 60 days notice without penalty. You can`t go back now and add penalties if your lease says he can leave without paying penalties. (yes, I learned that one the hard way).
Next, be clear on what your primary business goal is and decide what course of action gets you there. Your goal should be to keep full occupancy with the least amount of work and expense. He`s told you he will no longer be able to afford the rent in 3 months. This is far better for you to know now than in four months when he`s still in there and not paying. You now have the opportunity to market the property and find new tenants who can pay the rent. Hopefully you can continue with no vacancy and no disruption of your income.

Yes, you will probably incur some advertising and time expenses. If your lease allows it, then it`s fair to charge the lease-breaking tenant for those costs. I`m not familiar with ON law, perhaps even that is not permitted. At any rate, your main focus should be finding new tenants who CAN pay the rent. That will bring you a much better long-term return for your effort than chasing down a few $$ in penalties from someone who can`t pay them anyway.

 

[gwasser]

QUOTE (JimWhitelaw @ Mar 21 2010, 03:14 PM) First, what do the terms of your lease say about termination? Double check what terms YOU agreed to when he signed the lease. The sample lease doc available here on myreinspace (at least the one for Alberta) lets a tenant break the lease on 30 or 60 days notice without penalty. You can`t go back now and add penalties if your lease says he can leave without paying penalties. (yes, I learned that one the hard way).

Annual leases are more to the benefit ofrenters than landlords. Hence, don`t offer incentives such as `first month` free. After having three such leases broken this becomes pretty painful. However, you could make it worthwhile for a tenant to stay, by offering the last month of the lease term for free. Especially if you could link it to a lease renewal.

Regarding broken leases, there is nothing you can do. It all costs more effort and trouble than it is worth. As previous posters said, accept it, be happy with the long notice and start looking for new renters - spring is a good season to do so. Make sure the tenant gives you written notice so that it is sure he will really move out in three months.

 

[Nir]

QUOTE (gwasser @ Mar 21 2010, 03:39 PM) Make sure the tenant gives you written notice so that it is sure he will really move out in three months.

tricky question (not in order to trick): should I ask him to sign Form N9 or Form N11?
I think with N11 you can get an eviction order without a hearing. thoughts? Thanks.

 

[gwasser]

QUOTE (investmart @ Mar 21 2010, 10:08 PM) tricky question (not in order to trick): should I ask him to sign Form N9 or Form N11?
I think with N11 you can get an eviction order without a hearing. thoughts? Thanks.


Sorry, I am not familiar with Ontario. Here in Calgary, I would just ask for a written notice from the tenant.

 

[Nir]

QUOTE (gwasser @ Mar 22 2010, 09:50 AM) Sorry, I am not familiar with Ontario. Here in Calgary, I would just ask for a written notice from the tenant.
I think no harm in having him sign N11 in ALL such cases. N9 is ok too but more "unique" - just in case he gives 60 days notice. and even then no harm in just using n11. hope I got it right. thanks.

 

[housingrental]

investmart

I`m having a hard time believing you`re writing this given the time you spend on this forum

You want him to sign an N9
You need to try to re-rent to mitigate damages
He is responsible for rent until the end of the lease
HOWEVER
You have to try to re-rent the property
If you re-rent it successfully when he wants to leave he owes you nothing more.
If it takes you an extra month etc. before a new tenant fills the unit he owes you for that extra month, etc.
You will need to prove you tried to re-rent the unit. Ie document and log advertisements, inquiries, etc.
You should start posting advertisements today.

I`ve written on this a number of times. Please do a search of past posts if more detailed is needed.

 

[housingrental]

To add if my last message wasn`t explicit - do not sign n11 with him.
Your agreeing to end tenancy with n11.
Unless you want to agree to this.

QUOTE (investmart @ Mar 22 2010, 12:23 PM) I think no harm in having him sign N11 in ALL such cases. N9 is ok too but more "unique" - just in case he gives 60 days notice. and even then no harm in just using n11. hope I got it right. thanks.

 

[Nir]

Thank you Adam, very true!

However, I`m sure you understand sometimes even when you are correct legally, you simply can NOT get money from a person who has none.
In such a case, N11 and N9 are kinda the same, meaning will result in the same - a vacant unit.

In this case the tenant wants to leave end of next month. here is the dilemma - yes, on one hand he can not do it legally without paying for the month of May too! However, again, what if he literally has no money to pay for May!? N9 is good in theory but probably not increase my income by one cent compared to N11. some people you just don`t want to take to court.

NEVERTHELESS, I will USE your great advice as you convinved me N9 is still a bit more suitable, although not in line with his requested dates, if only to make it clear he must pay until then (if not more as you explained - until end of lease which i explained is not going to happen anyway),

Regards,
Neil
PS. yes, I`m on this forum for a long time however luckily thanks to great tenants I have I NEVER had a tenant sign N9 before or asking to leave early. I think that`s what you should find hard to believe not the fact that people are not afraid to ask any question they have cheers.

 

[housingrental]

Hi Neil, sorry happy for your questions

But
There is a difference
Go with N9
In a multi-unit building you need to be concerned about not just the one tenant in particular but the other tenants, and the ones your renting to. You want to create the expectation of contract enforceability and consistent treatment among your rental community.
Also for this particular tenant might be happier to keep the unit well presented for viewings and be more positive in responses to questions from potential renters if he has an incentive to get the unit filled.

For the love of your own future land-lording endeavors please take the above advice !



QUOTE (investmart @ Mar 22 2010, 07:16 PM) Thank you Adam, very true!

However, I`m sure you understand sometimes even when you are correct legally, you simply can NOT get money from a person who has none.
In such a case, N11 and N9 are kinda the same, meaning will result in the same - a vacant unit.

In this case the tenant wants to leave end of next month. here is the dilemma - yes, on one hand he can not do it legally without paying for the month of May too! However, again, what if he literally has no money to pay for May!? N9 is good in theory but probably not increase my income by one cent compared to N11. some people you just don`t want to take to court.

NEVERTHELESS, I will USE your great advice as you convinved me N9 is still a bit more suitable, although not in line with his requested dates, if only to make it clear he must pay until then (if not more as you explained - until end of lease which i explained is not going to happen anyway),

Regards,
Neil
PS. yes, I`m on this forum for a long time however luckily thanks to great tenants I have I NEVER had a tenant sign N9 before or asking to leave early. I think that`s what you should find hard to believe not the fact that people are not afraid to ask any question they have cheers.

 

[Mike Milovick]

QUOTE (investmart @ Mar 22 2010, 08:16 PM) However, I`m sure you understand sometimes even when you are correct legally, you simply can NOT get money from a person who has none.

Attempt to re-rent the unit and mitigate losses. Document showings and money spent on advertising. Prehaps you may not even incur losses.

Once re-rented, and losses have been crystalized, seek a judgment (Ontario) in Small Claims Court (application fee is about $90). Take the judgment and pop it on his credit bureau.

Once he puts his life together (sometimes years) and attempts to buy (lease) a car/home etc. he will be giving you a shout to make ammends.

Mike

 

[Nir]

QUOTE (housingrental @ Mar 23 2010, 08:23 AM) For the love of your own future land-lording endeavors please take the above advice !
will do.. thanks again.

 

[Nir]

QUOTE (MikeMilovick @ Mar 23 2010, 03:14 PM) Attempt to re-rent the unit and mitigate losses. Document showings and money spent on advertising. Prehaps you may not even incur losses.

Once re-rented, and losses have been crystalized, seek a judgment (Ontario) in Small Claims Court (application fee is about $90). Take the judgment and pop it on his credit bureau.

Once he puts his life together (sometimes years) and attempts to buy (lease) a car/home etc. he will be giving you a shout to make ammends.

Mike

Thanks Mike. good approach, something to consider down the road.. more work though.

 

[invst4profit]

Mikes advice is right on the money for Ontario LLs. In the case of tenants owing money (rent or damage claims) LLs should always file through small claims court. The ruling will stay on there record for 7 years (I believe) and usually will include garnishing of wages. At some point in time something will change, finding work, applying for loan etc, and you will receive monies owing.

Small claims court is a relatively simple and inexpensive route for LLs to take in policing criminal tenants. This also assists future LLs in screening out bad tenants where as LTB rulings accomplish very little in assisting LLs or preventing repeat offenders.

 

[Nir]

QUOTE (invst4profit @ Mar 25 2010, 08:27 AM) Mikes advice is right on the money for Ontario LLs. In the case of tenants owing money (rent or damage claims) LLs should always file through small claims court. The ruling will stay on there record for 7 years (I believe) and usually will include garnishing of wages. At some point in time something will change, finding work, applying for loan etc, and you will receive monies owing.

Small claims court is a relatively simple and inexpensive route for LLs to take in policing criminal tenants. This also assists future LLs in screening out bad tenants where as LTB rulings accomplish very little in assisting LLs or preventing repeat offenders.

Thanks Greg for the great input!

 

[jcab256]

The fact that he gave 3 months notice to you as opposed to packing up his stuff and leaving one night with no notice, would make me want to work with the guy.

My question is, do you have a company/brand that you use for real estate. If you do, combined with the fact that he gave 3 months notice that he wants out, I would work with him and not put a black mark on his credit. State that you will begin advertising to get a tenant ASAP, but that he will be responsible for any fees - with the trade off that he will not be penalized, or have his credit damaged. - you may also want to have him agree that you will keep the entire security deposit (assuming there is little/no repairs needed)

Doing this will be a positive for your company, as he will know that while it is a business, you are going the extra step to work with him, and not mess up his future chances to be approved for a car loan/credit card/whatever.
Going after the guy, garnishing wages, messing up credit, etc will be a negative for the company image, as he will likely be telling everyone and their dog that XYZ Company are a bunch of $%^&*!!!!

Another option is if you have another unit available that is cheaper that may be of interest to him. (if he was a good tenant prior to this)

Personally, the fact that he gave the 3 months notice, and didn`t simply skip out, would make all the difference to me. It doesn`t sound like he is a `professional tenant`, but simply made a bad decision, and is trying to correct it.

 

[mortgageman]

I just went through a similar situation. Just advertise the suite, get it rented and move on with your life. In my case I`m fortunate because I`m vacant for one night.

QUOTE (investmart @ Mar 21 2010, 01:47 PM) Hi All,

A tenant who moved in and signed a one year Lease 3 months ago, wants to leave in 3 months - half year before end of the Lease term.
He explained that he wants to end it earlier because he will have less money than he expected and will not be able to continue paying the rent if he stays longer. He added it is related to the fact he lost custody of his child and therefore will not be getting child benefits... bla bla..

My question is would you just let him leave without any penalty or expect him to compensate you for leaving early/breaking the lease?

I guess if he still had the right to give 60 days notice even if he signed a one year lease, then no additional penalty would be allowed(?)

THANKS.