Everyone who has ever rented a home knows that a lease agreement is a legally-binding contract. But what happens when the landlord-tenant relationship doesn’t work out for whatever reasons and the tenant needs to break the lease early and move on? As a landlord, how do you know when it makes sense to let a tenant break their lease? On the other side of the seesaw, as a tenant, in which circumstances is it justified to break your lease early without penalty and legal repercussions?

The best way to come to terms in this matter is for both landlord and tenant to come to a mutual agreement. As landlords, it’s expected to want a good amount of tenant stability; after all, tenant turnover is the number one cash flow killer in the real estate business. Without tenants,your business cannot thrive or even stay afloat. This is the reason why, in a majority of cases across the board, most leases are signed for a term of no less than one year and in some cases even a minimum of two years. Landlords don’t like to allow tenants to suddenly break a lease without a very justifiable reason. It makes sense from a business perspective, because high tenant turnover rate means constant instability. No landlord or property investor would be able to sit comfortably knowing that they have to constantly worry about their property units being rented. The issue of tenants wanting to break their lease actually happens quite regularly in the real estate industry.Breaking a lease essentially means that a tenant needs to move out of the particular rented unit before their lease term is finished, according to their lease agreement. The reasons that tenants want to break leases are often quite varied and cover the whole spectrum, ranging from downright unbelievable and made up excuses to fully justifiable circumstances. Some tenants wish to break their lease simply because “they don’t feel like living here anymore” to “I am expecting children and need to move to a bigger home”, to “I got relocated to a new country for a job.” Although both landlord and tenant enter into the partnership with full knowledge of what their lease end date is, in many cases, things just don’t work out in the real world. It could be because the landlord and tenant just don’t see eye to eye, or because a tenant is a nightmare to have on the property. The lease contract is a signed document which both landlord and tenant are expected to uphold, but it’s important to remember that as landlords, it is not possible to force tenants to stay if they really do not want to. There are usually penalties involved with early lease breaking, more so if the landlord and tenant don’t agree on the reason(s) for breaking the terms before its written contractual date.

There can be a myriad of reasons a tenant may want to break the lease, but lease-breakers can cost both time and money for the landlord’s business. Lease-breakers can throw a landlord’s business off course, especially the potential profit losses had not been considered and calculated into the rental property. This is why landlords are so reluctant about allowing tenants to break their leases, unless it is for very justified reasons. It is up to the landlord to give the okay to a lease-break, and a landlord must fully consider all the variables that are at stake should he or she allow a tenant to break their lease.

Most tenants find that the terms to justifiably break a lease tend to be too extreme and unnecessary, which is why we came up with the following list of real and legitimate reasons that a tenant should be allowed to break their lease. There are times when the reasons a tenant wants to break the lease is just down right unjustifiable, then there are other times when it’s a necessity to break the lease for the well being of both parties. We will explain below some of the most legitimate potential reasons on when it is okay to allow a tenant to break their lease and the reasons why:

 

They Are Getting A Job Transfer/Relocation

If a tenant is getting relocated to a new city, or new country, there is just no way you can force them to stay. Most working professionals can not anticipate what will happen at work. They might get promoted and need to move to a new country, or they get transferred elsewhere out of the blues. Nobody can really calculate these change of events into the equation. 

They Unexpectedly Lose Their Job

If a tenant suddenly loses their job, and does not have enough savings or job prospects of finding an immediate replacement income to cover the rent for the remaining months, we find that it is best to agree to let them break their lease and move on. After all, if the tenant really has no money to make rent, there’s no point beating a dead horse. It’s not anyone’s desire to lose their job unexpectedly, and at times like this, it is fully justified for a tenant to need to break their lease early and move out to either a place that they can afford or find alternative living arrangements. If you forcefully keep the tenant there, it will only hurt both parties in the long run. The landlord-tenant relationship will become more and more stranded as time goes on and expenses dry up. A tenant who unexpectedly loses their job and has no near future job prospects could spiral down into more financial problems, such as debt and bankruptcy. In cases like this, it really is best to let your tenant go as soon as possible and get your property back on the market for new prospects to rent out.

Sometimes,its easy to get soft-hearted on hearing a tenant’s unfortunate turn of events but do remember that this is a business relationship and it is not your responsibility to home your tenant for free or at a discounted rate due to their circumstances. It’s better to leave emotions out of it and judge the situation for what it is before you make any decisions.

 

They Encounter Extraordinary Turn Of Events That Requires A Move

Unfortunately, bad things happen all the time, to both good tenants and bad tenants. Life is full of surprises and we don’t always know what will get thrown our way. We can calculate for a lot of things, but there are certain circumstances that are just out of our control. We have had tenants get divorced, get diagnosed with serious illness or suffer some other types of misfortune that leads to a profound life change. There are certain circumstances in life that can cause radical shifts in a person’s life and the only way to cope with the problems is to shift gears. There are some extraordinary circumstances that are legitimate reasons for a tenant to break their lease, some of the more severe ones include:

 

    •       Tenant is a victim of domestic violence, or in danger from the living circumstances

    •       Tenant experiences a profound life change, such as a divorce

    •       Tenant is moving to an elderly home or assisted living establishment 

    •       Tenant or someone close to them contracts a serious illness

 

The above circumstances can dramatically change a person’s life and it is best to show empathy and compassion here and let them move on to focus on their problems. The tenant might need to use their rent money to deal with the trauma, such as paying for hospital and lawyer bills. If a tenant is speaking the truth and fighting to survive a traumatic incident, it’s best to let them go amicably. These are not situations that anyone calls for, and sympathy for your tenant is fully justified. 

 

They Are A Nightmare To Be In A Partnership With

Some tenants are simply a massive pain in the neck to work with. It’s easy to misjudge a person when you have only met them a few times briefly, and what may have seemed like a perfect fit during the application process can turn out to be an unwelcome nightmare. Almost every landlord and property owner has dealt with this, so you are not alone if these are problems you are currently dealing with. Sometimes, a tenant will seem perfect on paper, but once the keys are handed over to them and they have moved in, it becomes nothing but a barrage of complaints and incessant problems. Maybe you constantly have to deal with repairs because they keep breaking appliances in the property, they are always late with the rent and other utility payments, or they suffer through endless complaints about your new tenants by the surrounding neighbours. Whatever the case is, if they are a pain to work with and end up causing you more pain than gain and running your resources dry, it’s time to say enough and let them move out.

If you honestly feel like your tenant’s needs can never be met and you have done everything in your power to appease them, it’s okay to cut the lease short. Sometimes it is better to get out of a bad tenant relationship than to forcibly stay in one that only wreaks havoc in your life.Everybody has a different threshold for how much they can take before their bursting point is reached, and it’s up to you togage at what point that is for you. 

 

The Property Is Unlivable and/or Illegal

If there are serious problems regarding your property that makes your living situation unbearable or illegal, by law, a tenant is fully justified to terminate their lease early without penalty. There needs to be solid proof that this is the case, which you can then take up with your landlord and real estate lawyers. Most landlords with common sense would not want to involve the law,and in such cases would agree to allow the tenant to terminate the lease early.

 

Your Landlord Has Broken The Lease Terms

We always talk about tenants breaking the lease terms, but sometimes, the landlord can also break terms on their own contract. This is why it’s so important to get clarification on all the terms and understand everything fully before signing the lease. This is your way of protecting yourself, but if you don’t even know what your own lease terms are, how can you know if your landlord is not living up to his or her promises? 

 

Your Landlord Refuses To Complete Essential Repairs

There are certain home repairs that are mandatory for a landlord/property owner to take care of, should problems arise. If the landlord refuses to complete essential repairs on the property that hinders your living situation there, you are in every sense allowed to ask for a lease-break. If your toilet keeps on flooding and it’s not your fault, but your landlord refuses to repair it, it can become a health hazard. Repairs like this are necessary for our daily functions, and as tenants, it is your landlord’s job to answer to essential home repairs. Again, make sure that these terms are detailed on the lease so that there’s no room for argument when problems arise. 

 

Your Landlord Violates Your Privacy

Under certain conditions and in the case of emergencies, your landlord can be given permission to enter your home. This clause should always be written on the lease. However, there are some severe cases where landlords completely disregard the tenant’s privacy and personal space.Landlords are now allowed to enter the tenant’s home whenever he or she wants, during the rental period. Doing so is a clear violation of another person’s privacy and can be taken up for legal action. If your landlord has no respect for your privacy within your own home that you rented, then it’s time to break the lease and move out.

 

What Are The Options For Landlords If A Tenant Asks To Break Their Lease?

Generally, landlords have a few options:

 

1. Do not allow an early lease termination. If the tenant must leave, they could find a new tenant while pursuing the old tenant for the amount difference.

2. Agree to and allow for early termination, both verbally and in writing, so long as the tenant remains accountable until the property is rented to someone else.

3. Agree to and allow for early termination, both verbally and in writing, with no penalty and/or full return of deposit. 

4. Anticipate lease-breakers and include a set fee in the lease agreement based on the estimated time it will take to get a new tenant to rent out the property. The ease agreement should include specific and acceptable reasons for early lease termination, and the fees should be justified by real estate laws and be reasonable based on the actual profit loss. 

 

To Sum It All Up...

It’s understandable that landlords try not to let their tenants break their lease for foolish and absurd reasons, but we should understand that sometimes in life, it is necessary to let tenants go due to circumstances that may be beyond their control. Sometimes, the problems have accumulated so much that breaking the lease is the lesser of two evils just to get some peace of mind. How and when you decide to allow your tenants to break their leases is up to your personal feelings, intuitions, and business practices, but do keep your local market’s real estate laws in consideration. 

If both parties amicably agree to break the lease, then make sure that all terms are agreed upon in a written document that states everything clearly, such as that the tenant will be released from any further financial obligation of the property. If the landlord agrees on a no penalty policy along with a return of the tenant’s full security deposit, do ensure that the new contract explicitly guarantees the exact amount of return of the deposit. Getting every detail down on paper is paramount to avoid future misunderstandings and arguments.

Whatever the circumstances are, whatever the landlord-tenant relationship is, the best advice we have for you is to always keep the lines of communication open and maintain a harmonious rapport. Both landlord and tenant should let the other know that they can be upfront to discuss any concerns if need be. Although lease-breakers are not the most ideal for a real estate business, sometimes breaking a lease ends up being the best thing to do for both parties. Do remember to stay professional and avoid letting your emotions rule you.

If you still are not sure whether a lease-break reason is justified, check with your local real estate laws, real estate lawyers, and local real estate agents in regards to tenants’ rights in your city. A tenant has every right to break the lease as much as the landlord does if the reason is justified. Legal justifications vary from city to city, so do check with your local professionals to help you find out how to legally break your lease without penalty. 

 

Engel & Volkers property estate agents specialize in luxury homes and other luxury Hong Kong property for sale. For more information on luxury real estate in the Hong Kong region or if you need advice regarding the sale of or investment in property, please feel free to contact one of our realty agents through our website.