It is not uncommon to have a tenant vacate a property prior to the end of the lease term. Landlords have a duty to mitigate/reduce their losses by trying to re-rent the property. The tenant generally remains responsible for the rent due until the property is re-rented or until the tenant’s lease term ends, whichever is sooner. The tenant is also responsible for any costs associated with marketing or advertising the unit due to the early vacancy. (Note if a tenant turns in keys and surrenders possession you must accept surrender of the property back to the landlord; you may not “refuse” to take the keys.)
But what should a landlord do when the fair market value of the unit has changed? If the tenant’s monthly rent is $1000 a month, but current market rate when the tenant vacates is $1100 or if it has gone down to $900, how should the landlord advertise the unit?
It the market rate has increased, to mitigate your damages, you must be willing to accept the tenant’s rate for the balance of the tenant’s lease. If the tenant had three months left on his lease, you should advertise the property for three months at the tenant’s rate, but you could increase the rate mid-way through a new tenant’s lease to market rate. Be transparent in your advertising of these rates. If a new tenant is willing to pay the increased market rate right away and there is no delay in re-renting the unit, you may accept full market rate right away.
If market rate has decreased, however, you are not required to accept a lower rate for the balance of the tenant’s lease. When market rate decreases to mitigate your damages you may only be able to rent the unit for a lower rate, but the original tenant remains responsible for the balance of the rent. With our numbers above if you re-rent the property right away for $900 a month, the tenant would owe the difference between the new tenant’s rate and the tenant’s original rate for the balance of the original tenant’s lease. (If there were three months left on the tenant’s original lease, the original tenant would owe the $100 difference for three months or $300.)
Keep in mind the goal is limit the landlord’s losses and the tenant’s losses. It is unreasonable to run up advertising costs or other expenses in excess of the balance due in rent for the tenant. Additionally, for an apartment complex, you are not required to re-rent the vacated unit prior to any other unit specifically. Should a prospective tenant, however, want the unit vacated early it should not be withheld and you should not refuse to provide that unit to the prospective tenant even if other units are available.
Best practice if a tenant vacates early and you are working re-rent a unit earlier than expected is to be transparent in your advertising with rates. Where appropriate indicate the property is available at a lower rate for a few months but that the rate would increase as of a certain date. Communicate with the tenant that vacated early to ensure he understands possible expenses or differences in rent that he may be responsible for covering. Act reasonably and fairly in trying to re-rent the unit.