Can You Prevent Tenants from Breaking Their Lease?
Pop quiz: What is the most expensive aspect of owning a rental property?
a) Property maintenance and repairs
b) Insurance for the property
c) Replacing the stairs from the 2nd floor to the 1st floor with a slide
d) Sitting on market
If you answered D, you were correct! And if you answered C, well, invite us over some time because that sounds amazing.
So what can you do to avoid having empty rentals? Empty rentals happen in one of two ways - a tenant comes to the end of their lease and moves out, or a tenant breaks their lease because they are unhappy or unable to meet its terms. So, as a landlord, can you prevent rentals from being vacant? The answer is both yes and no. There are many reasons that otherwise happy tenants may find it necessary to break their lease and, in many cases, there is little that you can do to minimize the risks.
However, there are some cases where you can prevent vacancies and, if you do so, you will be profitable. Often this comes down to management and customer service, so we'll look at this as your primary strategy for preventing a tenant from breaking a lease.
That said, you should do more than just provide the appropriate services and ensure that your tenants are aware of your effort to resolve issues. We actually believe that you should go over the top for your best tenants. For example, we have even advised owners to offer free carpet cleaning to their best tenants on a yearly basis. And yes, this resulted in much stuttering and confusion in response, but when you think about it, it actually makes sense.
First, it will help with the upkeep of your investment. Second, it will motivate your tenants to stay in the property, because where else will they get such good service. Third, it will save you money, because if these are the type of tenants that deserve a free carpet cleaning they are most certainly the type that are taking care of your property. Fourth, and finally, the theory of reciprocity (rewarding kind actions with kind actions and vice versa) would suggest that this act of kindness will result in the same from your tenants, whether that is them staying, or taking care of the property, or referring new tenants to you for your rental properties. Can you imagine having a tenant going around town and bragging about their awesome landlord that cleaned their carpet for free? Hurray for free, word-of-mouth advertising!
Simply having this sort of consistency creates a system for premium customer service, and very few tenants walk away from rentals in which they feel they are heard, responded to, and valued.
That said, there are times when there are problems beyond your control and for this it is good to set, and implement, protocols for tenants who want to break a lease.
For instance, your tenant will sit down with you and review the lease - identifying the terms with which they have agreed. You may want to include a section that requires a tenant to be financially responsible only until you find a qualified replacement to take over the vacancy.
This can make things less frightening for tenants when they sign the lease, as it shows you are not going to be merciless if an uncontrollable issue occurs and they must relocate quickly. It also provides you with established terms that a tenant must meet when they indicate that they are moving out.
Fortunately, when you take the right steps, you can protect yourself from the financial strain that occurs when your tenants try to break their lease. If you take the aforementioned steps you can reduce the likelihood that a tenant will want to leave, and if they do, you will have yourself covered financially for enough time to find a new tenant. Imagine, a tenant breaks the lease on September 1st and is responsible for 2 months of rent following that date - then you find a tenant on October 5th. You don't miss a single months rent. A broken lease doesn't sound so terrifying now, does it?
a) Property maintenance and repairs
b) Insurance for the property
c) Replacing the stairs from the 2nd floor to the 1st floor with a slide
d) Sitting on market
If you answered D, you were correct! And if you answered C, well, invite us over some time because that sounds amazing.
So what can you do to avoid having empty rentals? Empty rentals happen in one of two ways - a tenant comes to the end of their lease and moves out, or a tenant breaks their lease because they are unhappy or unable to meet its terms. So, as a landlord, can you prevent rentals from being vacant? The answer is both yes and no. There are many reasons that otherwise happy tenants may find it necessary to break their lease and, in many cases, there is little that you can do to minimize the risks.
However, there are some cases where you can prevent vacancies and, if you do so, you will be profitable. Often this comes down to management and customer service, so we'll look at this as your primary strategy for preventing a tenant from breaking a lease.
Property Management and Customer Service
One of the best ways to maintain good client relations is through providing exemplary management and customer service. If there is an issue with the property, say a pipe starts leaking for example, it is important to quickly handle the issue. Not only should you handle the problem, but you should make sure that you are communicating with your tenants about the problem as it is resolved. You have to remember to view the situation from the tenants perspective. If you have called a plumber to come out and you know that the plumber will be there later in the day, you have done well. However, if you haven't communicated this to your tenant, it will seem as if you are doing nothing.That said, you should do more than just provide the appropriate services and ensure that your tenants are aware of your effort to resolve issues. We actually believe that you should go over the top for your best tenants. For example, we have even advised owners to offer free carpet cleaning to their best tenants on a yearly basis. And yes, this resulted in much stuttering and confusion in response, but when you think about it, it actually makes sense.
First, it will help with the upkeep of your investment. Second, it will motivate your tenants to stay in the property, because where else will they get such good service. Third, it will save you money, because if these are the type of tenants that deserve a free carpet cleaning they are most certainly the type that are taking care of your property. Fourth, and finally, the theory of reciprocity (rewarding kind actions with kind actions and vice versa) would suggest that this act of kindness will result in the same from your tenants, whether that is them staying, or taking care of the property, or referring new tenants to you for your rental properties. Can you imagine having a tenant going around town and bragging about their awesome landlord that cleaned their carpet for free? Hurray for free, word-of-mouth advertising!
Simply having this sort of consistency creates a system for premium customer service, and very few tenants walk away from rentals in which they feel they are heard, responded to, and valued.
That said, there are times when there are problems beyond your control and for this it is good to set, and implement, protocols for tenants who want to break a lease.
Lease Breaking Protocols
Your protocol should always begin with the question, "Why?" It is perfectly within your rights to ask a tenant why they are asking to break the contract. This can give you some idea of how you would like to proceed. Even when their reasons are legitimate (e.g., being transferred out of state by their employer or family illness) there are financial and legal obligations for which they are responsible. You or your property management company can perform that gentle reminder at the time of signing the lease so your tenant knows the cost of terminating the contract.For instance, your tenant will sit down with you and review the lease - identifying the terms with which they have agreed. You may want to include a section that requires a tenant to be financially responsible only until you find a qualified replacement to take over the vacancy.
This can make things less frightening for tenants when they sign the lease, as it shows you are not going to be merciless if an uncontrollable issue occurs and they must relocate quickly. It also provides you with established terms that a tenant must meet when they indicate that they are moving out.
Fortunately, when you take the right steps, you can protect yourself from the financial strain that occurs when your tenants try to break their lease. If you take the aforementioned steps you can reduce the likelihood that a tenant will want to leave, and if they do, you will have yourself covered financially for enough time to find a new tenant. Imagine, a tenant breaks the lease on September 1st and is responsible for 2 months of rent following that date - then you find a tenant on October 5th. You don't miss a single months rent. A broken lease doesn't sound so terrifying now, does it?
Author
pm-experts
ARPM is focused on helping investors acquire and manage rental properties while providing tenants with the best rental experience. We have been a leader in the residential property management industry for many years by assisting people with growing their portfolios, and keeping their existing rentals profitable.
