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What Happens if You Break a Lease: Here's What To Know

Knowing what happens if you break a lease could save you time and money as you navigate a fast-paced housing market.

August 27, 2021
August 27, 2021
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If you’re currently renting instead of owning your home and need to change your living situation fast, you may be wondering, what happens if you break a lease?

Breaking a lease isn’t ideal. But sometimes it’s inevitable. If you’re relocating for work, receive new orders as a military servicemember, or something more serious occurs, such as your significant other passing away, you may need to move quickly.

In today’s housing market, you might find a great property and want to buy fast, even though you still have a few months left on your current rental contract.

There are right and wrong ways to break a lease, especially if you’re hoping to get your security deposit back or avoid small claims court. Here’s what you need to know to end your lease agreement in the best way possible so it’s a win-win for both tenant and landlord.

What does it mean to break a lease?

“A lease is a legal contract between a tenant and landlord. It’s legally binding and comes with ramifications when terminated,” explained David Clark, lawyer and partner at The Clark Law Office in Okemos and Lansing, Mich.

Because it’s a formal legal contract, and all states and cities have different regulations regarding tenant-landlord agreements, reading your lease to understand its ins and outs is critical. The best time to scrutinize your lease terms is before you sign it, so you know what’s at stake if you need to end the contract early.

But if you realize you need to leave your current place before your lease is up, review the terms before you tell your landlord you’re preparing to hand in your keys.

Understanding your rights, your landlord’s responsibilities, and the lease termination clause will help you navigate conversations with your landlord or property management company. You’ll know how much you’re able to negotiate, if the landlord is violating the agreement, and how to handle outstanding debts to avoid legal action or credit issues. 

“There are some instances where a contract like a lease could have a provision that allows the tenant to get out of it,” said Lauren Blair, lawyer at Lauren Blair Consulting. “It's unusual and unlikely, but under certain situations that could be negotiated.”

One of the most amicable ways to break your lease is to notify your landlord early and negotiate next steps that work for both parties. Blair recommended following the steps outlined in the lease contract and giving the proper amount of notice in writing as soon as you can.

For instance, if the contract states that you need to give 30 days’ notice, try to adhere to that deadline. In emergencies, that can be difficult. But if you’re moving because you’re buying a house, or you’re relocating for work, you likely have enough heads up to plan at least a month out.

Related: How To Buy a House in 11 Steps | 2021 Guide

Early termination

For certain leases, early termination is allowed by paying a termination fee or working out a deal with the landlord. Nathan Grant, senior credit industry analyst at Credit Card Insider, recommended trying to negotiate a revised lease agreement, clearing all your unpaid debts, and helping the landlord find a good new tenant.

“Breaking a contract of lease without legally valid reasons can lead to a fee depending on the terms of the contract, or worse, breaking a lease could lead to a lawsuit,” Clark said.

If your lease doesn’t include an early termination clause and you break the lease, experts say the landlord can sue you for breach of contract.

Plus, Grant says that if you skip out on your lease without paying off your outstanding debts, your landlord can send those debts to collections. Ending up in collections for a broken lease can affect your credit score and ability to get a new lease “no matter how good you are presenting yourself to the next landlord,” Grant said.

You may find that your lease indicates that your landlord will make “reasonable efforts” to find a new tenant to take over your lease, but that you’re responsible for rent payments through the remainder of your lease if they can’t find one.

If that’s the case, ask your landlord whether you can help out with the search by posting the rental online or referring possible candidates to them. You may be able to speed up the search and avoid paying extra rent or fees altogether.

How much does it cost to break a lease?

Sometimes you have to pay to get out of your lease. Your landlord may charge fees or extra penalties.

“The penalty can come in the form of release fees or forfeiture of the security deposit. Fees can range from a month’s rent or even up to the remainder of the agreed term regardless of actual tenant occupancy,” Clark said. “Lease contracts can contain clauses to protect the landlord and hold the tenant responsible such as a rent-responsible clause or a buy-out clause.”

You may also sacrifice your security deposit to make a peaceful exit. Losing out on a big chunk of money like that is never ideal, but it’s preferable to going to court or having your account end up in collections. And giving up your security deposit or paying an early lease termination fee will probably cost you less than being on the hook for rent for the remainder of your contract.

Worst case scenario, not only does the tenant have to pay for the amount remaining on the lease and the tenant's own legal fees, but if it says so in the contract, they might have to pay the landlord's legal fees.”

Lauren Blair, lawyer at Lauren Blair Consulting

In addition to early termination fees, if things go south quickly, tenants may be on the hook for legal fees if they improperly broke their lease.

“Worst case scenario, not only does the tenant have to pay for the amount remaining on the lease and the tenant's own legal fees, but if it says so in the contract, they might have to pay the landlord's legal fees,” Blair explained. “Adding to that, the impact on credit and the ability of the tenant to find spaces and places in the future. Your future landlord will run a check and it could be harmful to your ability to get another lease if a judgment for breaking a prior lease has been entered against you.”

Breaking a lease without penalty fees

In certain instances, experts say you can break a lease without penalty fees.

It's worth exploring this avenue if you:

  • Have a tenant-friendly early termination clause
  • Give proper notice
  • Negotiate a fee-free way to end the lease with your landlord
  • Find a new tenant to sublet your lease (check with your landlord to make sure subletting is allowed) or to start a brand-new lease
  • Are a victim of domestic violence, assault, or harassment

Or if your landlord:

  • Breached the contract
  • Rented you the space illegally
  • Wants to sell or make repairs on the home and wants it vacant
  • Violated your privacy
  • Violated local habitation, health, and safety laws

State, county, and city ordinances may vary regarding whether these circumstances are adequate for a tenant to break a lease.

How breaking a lease affects your credit

“The good thing is that when it comes to your credit specifically, you're not going to be affected from simply breaking the lease,” Grant said. “There's nothing that ties your rental agreement to your credit score. … As a general broad strokes approach, rent isn't being reported to the credit bureaus.”

Where the credit and financial dangers lie are unpaid debts to your landlord, such as unpaid rent or property damage costs. 

“In those cases, if the landlord isn’t able to collect payment from you by reaching out directly, they may sell that debt to a collections agency who may come after you. And when a debt is sold to them, then it can be reported to the credit bureaus,” Grant said. “Even if you pay it, after it's been reported to collections, it still can remain on your credit report for up to seven years.”

Let’s say you went to court over the broken lease or unpaid rent and fees. “If there's a judgment in the landlord's favor, then those judgments are public knowledge of record and usually credit agencies are able to get hold of that information and that's how it negatively impacts credit scores,” Blair said.

With that ruling in your landlord’s favor, the court-issued credit judgment can show up on your credit report for up to seven years, according to Clark, and there can be a substantial reduction in your credit score, making it difficult to secure a new lease.

The good thing is that when it comes to your credit specifically, you're not going to be affected from simply breaking the lease. There's nothing that ties your rental agreement to your credit score.

Nathan Grant, Senior Credit Industry Analyst at Credit Card Insider

Understand your rights

“Tenants have the right to terminate the lease for valid reasons without legal repercussions when the landlord fails to comply with local health and safety codes or violates the tenant’s right to privacy,” Clark said. “Life-changing events for the tenant, such as military service, divorce, death of a spouse, harassment, or domestic violence cases are also lawful reasons for early termination of lease.”

If your landlord isn’t performing their duties or meeting the expectations required by landlord-tenant laws in your area, you may have the right to break your lease, Blair said. But the key is knowing local and state law requirements when it comes to landlord responsibilities.

“It would be important for tenants to look into the tenant rights of their particular jurisdiction,” Blair said. “For example, there's a right to get your security deposit and some states or ordinances require security deposits to be in an interest-bearing account so not only do you get your security deposit back after the end of the lease, if there’s no damage, but it should also be with interest.”

To be on the safe side, you may want to seek out legal advice before you decide to break your lease or approach your landlord about changing the leasing agreement. The legal reasons allowing a tenant to break a lease vary by state, county, and city.

The military clause

If you’re a military servicemember who’s currently renting but needs to move due to new orders or deployment, you may be able to invoke the “military clause”, which is protected by the Servicemembers Civil Relief Act (SCRA). Based on this clause, you can legally break your lease under specific circumstances, if the clause is included in your contract.

To avoid penalties, military servicemembers must prove they signed the lease before active duty and that they’ll be on active duty for a minimum of 90 days. They also have to provide their landlord with a copy of their military orders and a written copy of their intent to break the lease as close as possible to 30 days in advance.

If you signed a lease after you began active-duty, you can still terminate without penalties if you received a permanent station change or deployment order that is longer than 90 days.

If you’re a new renter and you don’t see a military clause in the lease agreement, ask your landlord to add one. This is especially important if you’re an active-duty servicemember or are in the National Guard, Reserves, or Coast Guard.

How to break a lease if you need to move fast

There’s never a good time to break a house or apartment lease. After all, you signed a contract and your landlord is counting on you to pay rent and occupy the property for the agreed-on amount of time.

But sometimes life happens and you need to move faster than you expected. Here’s how to get out of a lease quickly if you find yourself in that situation:

  1. Review the terms of your lease agreement and any early termination clauses
  2. Provide your landlord with written notice of your intent to break your lease as soon as possible
  3. Negotiate with your landlord on early termination fees or subletting the property to a new tenant. They may let you leave without a penalty if you can find a new renter to take over for you
  4. Help the landlord make the property as appealing as possible. You might hire a professional cleaner or make small fixes to the place to get it rented faster to someone new
  5. In a worst-case scenario, follow your lawyer’s guidance on how to inform your landlord of legal action you plan to take against them

What happens if you break a lease FAQs

Is it bad to break a lease early? Not necessarily. If your landlord has violated your rights or failed to uphold their property and legal obligations, there may be remedies for the tenant that including terminating the lease. The tenant needs to review the lease, local laws, and regulations to see their options.

However, if you have a good relationship with your landlord and they’ve upheld their end of the lease agreement, your best course of action is to notify them in writing that you need to end your lease and negotiate friendly cancellation terms.  

Does breaking a lease hurt your credit? Breaking a lease can hurt your credit if you have unpaid rent or outstanding balances and your landlord sends them to collections agencies, which then report them to the credit bureaus. Those derogatory marks can remain on your report for up to seven years and cause a substantial reduction in your score. But breaking a lease doesn’t hurt your credit in and of itself.  

How can I break my lease without being penalized? If there’s not a simple early termination clause in your lease agreement, you’ll need to work with your landlord to negotiate a penalty-free lease break. Be sure to settle any outstanding bills you have with them, and you may want to offer to help them find a new tenant to take over your lease or begin a new one.  

Communicate early and often

Breaking your lease can complicate the moving process. But if you’re able to speak with your landlord and agree on amicable separation terms, you may be able to cut the contract with minimal fees and zero credit issues.

Remember that your landlord’s goal is ultimately to avoid losing money and to keep the place rented. Offering to find a qualified tenant to take over the rental unit may make them more amenable to letting you out of the contract early.

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