Broken Leases with Little Notice – How to Recover

Hey there, Keyspire community. I’m Amanda Keyspire’s senior coaching manager and also our in-house property management expert. I wanted to record this video today and share with you about a recent property management experience. Now over the years as I’ve been coaching people through real estate education.

I found that the number one fear of new investors, if they’re going to do some active strategies and property management is that they are terrified if they end up with a tenant who refuses to leave their property. Now in today’s video I’m gonna talk about the opposite of that. So what would you do as an investor if all of a sudden your tenant up and leaves your property?

Okay, so I recently had filled one of my units, and I’m going to talk about this in a case study format. Okay. And I’m definitely interested in hearing about your guys’ perspectives as well. So imagine this, you rent your unit. The rent is $2,000 a month, but this was the month of July and I had tenants move in halfway through the month.

So we prorated the month of July. So I’ve collected $1,000 dollars for first month’s rent and then $2,000 for last month’s rent. And we signed a 12 month lease. Okay, so I am a happy landlord up until this point. Now my tenant, and this is a two unit home as well, and also the property is in Ontario.

So these are a couple important details. Now, the tenants had, they wanted to prorate the month because they wanted a couple weeks to actually move into the property. And during this time they, they started slowly moving in their things and I guess decided that they didn’t want to live at the house any longer.

That the tenant in the basement has a couple children. And I guess these people weren’t really considering that children make noise. Now I get an email one morning that says we’re unhappy with the rental unit and we want to book a phone call with you. Of course I schedule a phone call with these new tenants of mine and their number one complaint is that there are children playing in the backyard, and this is so incredibly loud for them.

And now they work from home full time. Both of them, because of the pandemic, they’ve got remote employment positions, and this is just so unbearable that they cannot stay at the property any longer. They want to break their lease. And now they’ve given me four days notice and they said, we’ve actually already packed up and left the property and we’re giving you four days notice and we are requesting our last month’s rent be paid back to us.

So of course, I’m surprised, I’m taken aback by this situation. So we have a phone call about this and I explained to them that while you just signed a 12 month lease, you’re breaking the lease here. And in Ontario landlords have rights as well. So now I’m left in a position of what do I do in this situation?

So what I say to them in the conversation is I educate them a bit about the last month’s rent that they’ve already paid me, and I said I’m not giving that back to you unless I actually rent the property for August 1st. Okay. And I am within my rights to actually hang onto that money because they haven’t given me no nowhere near 60 days notice to vacate the property.

Now there’s a couple other complexities that, speed up my next couple steps here as well. I’m in the middle of a refinance on this property as well, and I’ve submitted the leases to my lender. Okay, so now I actually have a vacant unit so that when the appraiser comes to the property, they’re gonna see that nobody’s actually living here, and I have an invalid lease.

So my perspective in this situation is I need to refill this property as quickly as possible, but of course, cover any, lost rent that I might be incurring because of this situation. So I get off the phone with these people and then I say to them, Listen, I’m gonna send you an email to summarize our conversation.

I want you to reply back to me to acknowledge that you understand our conversation and our agreement in the same way. So here’s what I got them to agree to, was… okay, fine, I’ll let you break your lease because you’re nice people and you’ve already moved out. So now we’re not even governed through the landlord tenant board.

So if I want to go after them for damages to my property, I actually have to go to small claims court, and I don’t want to do that. We’re still in the middle of the pandemic, and that is a whole other beast that I’m not interested in dealing with. Also, I want to get it re-rented as quickly as possible.

So I said to them, Listen, I’m keeping your last month’s rent, and I want you to agree that’s fair. I’m going to try my hardest to get it rented as quickly as possible, and your last month’s rent is going to cover any any lost vacant period here as well. So these people were very reasonable and they were kind, and they said, yes.

Okay, we will agree to that. So what did I do? How did I handle this situation well? I’m a house hustler. Okay? So I reposted my ad as quickly as possible. I booked as many tours as quickly as possible. I actually reached back out to some other tours and applicants from the first round of filling this property.

And turns out that I actually refilled the unit for August 1st. So just in a matter of a couple of days, and I actually rented it for $50 higher. So in the end, I reached back out to these people, and I gave them back their last month’s rent. I got new tenants into the property right away. Again, 50 bucks higher, which is amazing.

I was pleased with that. And then also I was able to resubmit the new and valid lease for the appraisal so that I could carry on with my refinance to, for this property. So my question for you guys, the Keyspire Community, what would you guys do in this situation? Would you guys have gone after this tenant and said, Hey, I’m taking you to small claims court because you actually owe me more money for the lease that you broke.

Would you actually duke it out in court? Would you cut your losses and say, Hey, my time is worth a little bit more than this. Would you have dragged your feet and not tried to refill it as quickly as I did? So I definitely wanna hear from you guys. Please go ahead and leave us a few comments and share with everybody else within the Keyspire Community.

So I hope you guys enjoyed this video and we will certainly be reading the comments below. So enjoy the rest of your day and remember, stay safe out there guys. Bye.