Real Estate Matters: Landlord seeks compensation for tenant’s early lease termination
Q: I own and have rented a townhouse in one of the northwest suburbs of Chicago since 1990. I used to get my renters through newspaper ads, then Craigslist. More recently, I hired a local Realtor to list the unit in the multiple listing service (MLS). The Realtor found a new tenant much faster than I would have, and provided a credit check report, so it was worth her fee.
My question is about what I can do if a tenant moves out before the lease ends. My understanding is that I have a legal right to keep charging the tenant monthly rent until I find a new tenant or the lease ends. I also have to diligently begin seeking a new tenant. I’m wondering if I can expect reimbursement for cleaning and repairs beyond ordinary wear and tear, and advertising fees.
With regards to advertising fees, can I charge them the Realtor’s fee to find me a new tenant? That fee is typically one month’s rent, and it is based on the new rental rate, which may be a bit higher than what the renter had been paying. What if they move out just one month before the lease ends? Is it still appropriate to charge them for the Realtor’s fee?
A: It’s nice to get a letter from a generally happy landlord. We’re delighted that you’ve had success renting out your townhouse for more than 30 years. Clearly, you know how to find good tenants and keep them reasonably (or very) happy.
These days, landlords have lots of options for listing their rental properties. These include listing the property with a real estate agent, or using online listing services such as Zillow.com, Apartments.com, Trulia.com, Craigslist.com, and Nextdoor.com, among others. Or, you might go the old-school route and put a listing sheet in your neighbors’ mailboxes (or under their doors), or stick a sign in the window or in your front yard. Each of these carries different costs and benefits.
Your question is really about your tenant and their decision to move out prior to the end of the lease term. Your lease agreement should contain a paragraph that describes the remedies you have should the tenant default under the terms of the lease. However, some municipalities may limit those remedies based on whatever landlord-tenant ordinances they may have passed. So, you’ll need to look at both your lease agreement and any local landlord-tenant ordinances to understand what actions you may take against a tenant who breaks your lease.
What happens if the tenant breaks the lease before the term ends? If you have advance notice and are able to re-lease the townhome without a financial loss, you may not have any actual damages to claim from the tenant. (Physical damage to the property is another story. We’ll get to that shortly.)
You’re right about attempting to minimize your financial loss by trying to re-lease the property quickly. In general, the law doesn’t look kindly on landlords who don’t take some action to limit the damage, particularly if the action doesn’t require much time or money.
In your case, you could relist the place for rent. If you find someone quickly, so that you don’t have a gap in your rental income, your only expense would be the fee paid to the listing broker for their service. However, if the property remains unoccupied for a month or two, your tenant should be responsible for making you whole. Generally, we think that you should be able to recover the listing agent fee, as well as any loss of rent you sustain due to the tenant’s early termination of the lease. But, you’ll need to talk to an attorney in your area to confirm what local laws allow.
Now, let’s talk about physical damage. There’s a difference between actual physical damage to the unit and ordinary wear and tear. For that matter, there’s also a difference between ordinary wear and tear and someone who leaves your property looking and smelling like a garbage pit.