When drafting a lease contract for your tenants, an important clause to include is terms for early cancellation. Some renters may need to end their lease before their contract is up, and well-defined terms for early cancellations protect the rights of both parties and help avoid expensive legal disputes.
Here are four elements you need to include in the lease agreement to cover this situation.
Conditions for early lease cancellation
Tenants need to know what you consider valid reasons for early cancellation of their lease. This can cover cancellations before a tenant starts living in the property or while they’re occupying it.
Some conditions to consider are:
- Inability to settle the deposit or advance payment before they move into the property
- Valid property hazards documented through an accredited inspection
- Necessity of change in residence, such as in cases of personal safety, job relocations, military deployment or overseas migration
Apart from laying these out, you should also include a list of accepted documents to prove the validity of their reason.
Notice requirements
When your tenants see the need to end their lease early, how should they communicate this with you? You can specify here conditions, such as:
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- Notice period: Many landlords choose a notice period of 30 to 60 days before the intended move out date.
- Format: Notice for early cancellations should always be in writing and signed by both tenant and landlord.
- Delivery: Is an email enough, or should they send their signed notice through certified mail?
As a rule of thumb, always require notices to be in writing and clearly state that your tenant will break their lease early and when they intend to move out. This protects both parties from lease disputes due to confusion and miscommunication from both ends.
Penalties and other financial consequences
An unexpected and early vacancy can be stressful since you would have less time putting the property up for rent and finding new tenants. You can still recover compensation for this by including reasonable penalties for early cancellation in the clause.
Typically, you can opt for an early cancellation fee equivalent to one or two months of rent. This can be collected as part of the tenant’s last rental payment or as an advance payment when they sign their lease.
Obligations post-lease cancellation
Tenants and landlords have residual responsibilities to fulfill once the cancellation takes effect. Renters should take all their personal belongings and leave the premises in good condition. Landlords have to schedule prompt inspections of the property and return the tenant’s deposit on time.
Further documentation is recommended but not required from your tenant to show the state of the property as they left it. They can send you a video of the bare property and reports of damages found within 24 hours of them moving out, if that helps both parties have peace of mind.
Protect your rights as a landlord
A well-written contract with clear clauses helps protect your property and your rights as a landlord. To ensure you’re covering all bases, having your contract reviewed by a legal expert is your best option. They can give you advice on which parts to revise and ensure your contract is solid.