Lease Agreement Clause

[Ken15]

Below is a clause that I came across in a lease agreement I signed when I was living in an apartment building about 10 years ago. I was considering including ths clause in all my lease agreements. My thoughts are if a tenant is going to break a lease they will just "skip out" and leave it up to me to get money out of them. This way I get some money and they get out of their lease early.My rentals are located in Waterloo, ONAny thoughts????BREACH OF TENANCY AGREEMENT BY TENANT:

In the event the Tenant desires to vacate the leased Premises PRIOR to the end of the Lease Term, the Landlord shall permit the Tenant to so vacate provided the Tenant:

(a) gives sixty (60) days written Notice to Vacate prior to the last day of the month in which tenancy will end;

and

(b) Submits payment of the sum of $ 1000 in Cash, Certified Cheque or Money Order, payable on the first day of the last month of tenancy. Upon receipt of the sum of $1000 the Landlord agrees to rescind this Lease contract and absorb all costs to re-rent this unit. The Tenant acknowledges this as a contractual agreement between the Tenant and the Landlord, not contained in the Tenant Protection Act.

Failure to remit payment of the sum of $1000 on the first day of the last month of tenancy will result in the withdrawal of the offer to early termination of the Lease.

 

[NorthernAlex]

Hi Ken.

First at all: I am new here and relativly new to the RE market in Ontario and its landlord/tenant laws. So my statements are just my 2cents.

You are mentioning the Tenant Protection Act, which was only in effect until January 30, 2007. By that means that you would have to call it now Residential Tenancies Act. Reading the same I doubt that this clause would survive any legal check (even if I like it), but as I said above, I am a landlord novice here in Canada and so far blessed with nice tenants.

Kind regards,

Alex.

 

[GarthChapman]

Good clause, but why not require the `break fee` 10 days from the date the tenant gives you their notice. That would give you more time to act if they did not pay.

 

[Mike Milovick]

If a tenant is going to skip out, they are going to skip out. Putting in a clause documenting early termination cost is not going to be perceived as benefit to a tenant. I might also suggest it is voidable.Why take $1000, when you can pursue tenant for remainder of tenancy in smalls claims court assuming you are out of pocket for costs? I have good leases with guarantors. I have had situations of non-payment - but never bad debt. I might suggest working on your underwriting side and get high quality tenants with jobs, good credit or solid guarantors - or all three. If you have this in place, you will never have any collection issues.In event of tenant default, the small claims process is VERY, VERY easy. Mike
QUOTE (Ken15 @ Dec 16 2008, 08:40 AM) Below is a clause that I came across in a lease agreement I signed when I was living in an apartment building about 10 years ago. I was considering including ths clause in all my lease agreements. My thoughts are if a tenant is going to break a lease they will just "skip out" and leave it up to me to get money out of them. This way I get some money and they get out of their lease early.

My rentals are located in Waterloo, ON

Any thoughts????

BREACH OF TENANCY AGREEMENT BY TENANT:

In the event the Tenant desires to vacate the leased Premises PRIOR to the end of the Lease Term, the Landlord shall permit the Tenant to so vacate provided the Tenant:

(a) gives sixty (60) days written Notice to Vacate prior to the last day of the month in which tenancy will end;

and

(b) Submits payment of the sum of $ 1000 in Cash, Certified Cheque or Money Order, payable on the first day of the last month of tenancy. Upon receipt of the sum of $1000 the Landlord agrees to rescind this Lease contract and absorb all costs to re-rent this unit. The Tenant acknowledges this as a contractual agreement between the Tenant and the Landlord, not contained in the Tenant Protection Act.

Failure to remit payment of the sum of $1000 on the first day of the last month of tenancy will result in the withdrawal of the offer to early termination of the Lease.

 

[Ken15]

QUOTE (MikeMilovick @ Dec 18 2008, 09:00 AM) If a tenant is going to skip out, they are going to skip out. Putting in a clause documenting early termination cost is not going to be perceived as benefit to a tenant. I might also suggest it is voidable.

Why take $1000, when you can pursue tenant for remainder of tenancy in smalls claims court assuming you are out of pocket for costs? I have good leases with guarantors. I have had situations of non-payment - but never bad debt. I might suggest working on your underwriting side and get high quality tenants with jobs, good credit or solid guarantors - or all three. If you have this in place, you will never have any collection issues.

In event of tenant default, the small claims process is VERY, VERY easy.

Mike

I don`t think you could ever sue someone for the balance of the lease remaining. I think you would have to "minimise your damages" and try to re-rent the property as quick as possible. I guess if the unit does not rent for a couple of months you could sue for those vacant months. Again... My thoughts are to try and avoid hassles and give the tenants a way out with a penalty fee. (Usually charge an extra months rent). Its inevitable people are going to break leases due to re-locating, new jobs, divorce etc... Instead of the tenants skipping out, or subletting my property, or trying to get evicted this is a simply way out.

 

[GarthChapman]

You can easily enough get a judgement for monies owing under the LTA, but it is quite another thing to collect on it (I`m talking Alberta here). If the tenant does not pay you may be best to register your judgement with PPSA (Personal Property registry). You may get paid if they don`t want the resulting damage to their credit.

A lease break fee is not uncommon - and we have collected on those in the past.