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Breaking a Lease on a Rental Agreement
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Most rental agreements have a section regarding the renter breaking the lease agreement.
While there is also likely a section or several sections regarding when the leasing
agent can evict the renter, the section on breaking the lease should be of particular
interest to those who might be in a position to have to break the lease some day.
Renters should understand these contract terms so they can make an informed decision.
Additionally the renter should consider all costs associated with breaking the lease.
This includes both financial costs as well as emotional costs.
Understand the Contract Terms
Renters should review their rental agreement carefully before signing this document.
The rental agreement is a legally binding document which should be given proper
consideration before entering into the agreement. This is important because
understanding these terms will be essential if the need to break the lease
becomes a reality.
Rental agreements typically do allow the renter to break the lease but not
without some form of penalty. This penalty usually comes in the form of
requiring the renter to give a specified amount of notice before the contract
is up and also requires the renter to pay a sum of money to break the rental
agreement. A notice of 30 days and a lease break amount equal to one month’s
rent are common penalties associated with breaking a lease, however, individual
leasing agents may impose penalties which are either harsher or less severe.
Consider the Costs of Breaking the Lease
As previously mentioned there is typically a fee associated with breaking a
lease. This fee is often set equal to one month’s rent. While paying this fee
may seem excessive there are some instances in which it is an economically
good decision to break the contract even though there is a financial penalty
imposed.
Consider the example of a homeowner who is the process or relocating due to
a job change. The homeowner may opt to rent an apartment in the new state
while the house is put up for sale in the previous state. If the renter enters
into a 12 month contract under the supposition that it will take this long to
sell the old house and purchase a new house, he may be surprised if his other
house sells quickly and he finds a home in his new state rather quickly. This
may all occur within a matter of 2-3 months.
The renter has the option to stay in the apartment until the rental agreement
nears expiration and then start looking for a home. However, this option runs
the risk that the home he previously found will not likely be available. The
renters other option is to place a bid on the new house and plan on breaking
the lease if able to close soon on the new house. In this case, the renter
would be saddled with both a rent and a mortgage for 9-10 months. This will
likely be significantly more expensive than the price the renter would pay
to break the lease.
Breaking the Lease is Not Always a Financial Decision
The decision to break a lease is not always completely a financial decision.
There are sometimes emotional components which factor into the equation.
For example a renter may have only 1-2 months remaining on the rental
agreement when offered a dream job which will require relocation
immediately. Although breaking the lease that late in the agreement is
usually not financially wise, the renter may make this decision to avoid
missing out on a dream job.
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