BROKER RISK MANAGEMENT
WEEKLY PRACTICE TIP
Tenant Terminates Lease Early
Q: I represented the landlord when she signed a one-year lease with a tenant. Now the tenant has a job transfer after four months into the lease and has stated that he is leaving early. What are the landlord’s rights here if the tenant moves out early? Landlord has a security deposit equal to two months of rent. How can that be applied?
A: Basically, a tenant with a lease is obligated on the lease for the full term. If the tenant terminates the lease early without the landlord’s approval, then that tenant has breached the lease and is liable for damages.
LANDLORD’S DAMAGES: The landlord is entitled to recover:
1. Any unpaid rent from the time of the last rent payment until the end of the lease. However, the landlord must “act reasonably and in a good faith effort to mitigate damages.” Civil Code §1951.2(c)2. In other words, the landlord must make a reasonable good faith effort to re-let the premises; and,
2. “Any other amount necessary to compensate the lessor for all the detriment proximately caused” by the tenant’s breach. Civil Code §1951.2(a)4. This includes any expenses incurred in re-letting the premises including advertising, credit checks, cleaning, etc. The expense of re-letting could include the commission paid to a leasing agent if that is necessary and reasonable for the rental. But that could be offset by the remaining time left on a lease at the time of the tenant’s breach. For example, if there is one month left on a one-year lease when the tenant terminates, the tenant can argue that the landlord would have incurred that expense in one month anyway.
The tenant is liable for the damages even over and above the amount of the security deposit.
A tenant may try to assist the landlord in re-letting by finding a qualified substitute tenant for the premises. So, if a tenant finds a qualified tenant who can move in and pay rent right away, the tenant may be able to prove that the landlord failed to mitigate damages if the tenant is rejected.
SECURITY DEPOSIT: The security deposit can be used:
1. To recover any defaults in payment of rent, less any mitigated amounts;
2. To repair damage caused by the tenant beyond normal wear and tear;
3. To clean the unit; and
4. To satisfy any other defaults or obligations of the tenant under the lease.
Civil Code §§ 1950.5 (b), 1950.7(c)
ABANDONMENT BY TENANT: If a landlord discovers that a tenant has simply abandoned the premises, that landlord should immediately contact a qualified California landlord-tenant attorney because specific procedures must be followed including an initial notice to the tenant. Civil Code §§1951.2 – 1952.2
MOVE-OUT PROCEDURES: Notice of Inspection Rights: The landlord must give the tenant a written notice that the tenant may request an initial inspection, and may be present at that inspection, within a reasonable time after either: (a) the landlord or tenant gives notice to terminate the tenancy, or (b) before the end of a fixed-term lease. However, a landlord may enter a tenant's property without prior written consent if the tenant agrees at the time of entry to allow access to the property. Civil Code §1950.5.f
For more information on tenant move-out procedures, see Weekly Practice Tip:
“Tenant Move-out Procedures and Forms”
For more information on this topic, generally see:
CAR Legal Memo: “Landlord-Tenant Guide for Realtors©” at:
http://www.car.org/legal/landlord-tenant-folder/landlord-tenant-guide/
PRACTICE TIPS:
1. This information is for real estate agents’ information only. DO NOT GIVE LEGAL ADVICE TO LANDLORDS OR TENANTS.
2. Always refer your landlord and tenant clients to a qualified California landlord-tenant attorney for advice. If the property is subject to rent control, that attorney should also be familiar with the details of that rent control law.
3. A good general unbiased source of information for landlords and tenant can be found in the California Department of Consumer Affairs’ publication: “A Guide to Tenants’ and Landlords’ Rights and Responsibilities” at: www.dca.ca.gov/publications/landlordbook/catenant.pdf
DO NOT FORWARD TO CLIENTS. This Weekly Practice Tip is for the exclusive use of clients of Broker Risk Management and their agents. It may not be reproduced or distributed without the express written consent of Broker Risk Management. The advice and recommendations contained herein are not necessarily indicative of standards of care in the industry, but rather are intended to suggest good risk management practices.
© Copyright Broker Risk Management 2015 01/23/15