Q: Our tenant broke our one-year lease after six months. He has written me a letter claiming he is not responsible for the remaining six months of rent because he had to move after losing his job.
We understand that landlords have an obligation to minimize the loss of rent, but the rental market here is very slow and there is hardly any demand. In the past we have just put up a small sign and we would receive dozens of calls. Not this time. So we have even hired a top local real estate firm to list and show the rental unit, but after 60 days we still have no qualified applicants.
Each month we send the former tenant a rent invoice, but he is refusing to pay. We finally deducted the first month’s rent from his security deposit, but with the other charges for damages there is not enough to cover any more unpaid rent. The ex-tenant, an attorney, is very threatening in his letters to us and seems to be attempting to intimidate us into dropping our claim that the rent is still owed. We would be very grateful for any advice that you could offer.
A: Your tenant may be an attorney but he is incorrect to claim that his change of employment status is grounds to unilaterally breach or attempt to terminate the lease. He is still obligated to pay the rent each month for the entire balance of the lease term. The only exception would be if you had made a specific agreement allowing him to break the lease under certain conditions.
In today’s economic environment, many tenants are seeking such "early termination for cause" clauses. But your former tenant apparently didn’t think ahead by negotiating that right, and as a result, he remains liable for the rent each month.
You should continue to send him an invoice for rent on or before the rental due date each month. It sounds like you are following the proper procedures, as you do have a duty to mitigate or minimize the loss of rent and must take reasonable steps to re-rent the property. Hiring a local real estate firm sounds prudent based on the weak market conditions. I would also suggest you give the firm a short narrative of the efforts you are making to re-rent the property so that you can prevent or at least show that you made reasonable efforts should the tenant ever challenge your efforts to mitigate their loss. …CONTINUED
Your former legal beagle tenant may be bluffing you on the issue of job loss as grounds for canceling the lease, but it certainly seems likely he is preparing to challenge you on your effort to make a reasonable attempt to re-rent the premises. If he can make a compelling argument along these lines, a court could find in his favor and thus you could be precluded from collecting some or all of the unpaid rent.
Be sure to have a written agreement with the real estate firm clearly showing that they have been under contract to re-rent the property since soon after it became vacant and that it was in rent-ready condition. This agreement should also show that the real estate firm (as a third-party firm) will be compensated for re-renting the property and thus they are motivated. Of course, the costs you incur to re-rent the property (including any advertising and fees paid to the real estate firm) are also chargeable to the former tenant.
Unless you are very experienced or quite articulate in the area of tenant-landlord legal issues yourself, I think that it would be very wise to hire an attorney who can pursue the collection of the unpaid rent from your former tenant. The attorney can also do a better job enforcing your legal rights and help you avoid making any mistakes that your former tenant can twist to his advantage. The cost of the attorney cannot be charged to your former tenant, but it may be the best investment you can make.
Also, remember that you cannot try to charge the incoming tenant more in rent than the former tenant was paying or demand a longer lease term or higher security deposit. Under the rental market conditions you describe, you may not even be able to get the same rent as your former tenant was paying or may have to offer rental concessions such as "free rent." Your real estate firm can advise you on how to get the property rented in a reasonable timeframe for a fair market rent. They can also advise you about any legal rights you may have to charge any difference in rent owed under the former tenant’s lease versus what you can collect from the new tenant for the balance of the former tenant’s lease.
This column on issues confronting tenants and landlords is written by property manager Robert Griswold, author of "Property Management for Dummies" and "Property Management Kit for Dummies" and co-author of "Real Estate Investing for Dummies."
E-mail your questions to Rental Q&A at rgriswold.inman@retodayradio.com.
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