Landlord / Tenant Q&A: LURLINE R. JOHNSON (R), ABR, CRB, CRS, GRI, RMP
LURLINE R. JOHNSON (R), ABR, CRB, CRS, GRI, RMP
Property Profi les, Inc.
Past President, Oahu Chapter
National Association of Residential Property Managers
Q. I have a tenant that wants to break his lease after only 4 months – he signed a one year contract.
I think that I have underpriced my rental and want to increase the rent on the next renewal by $200. Can I go ahead and advertise the unit at the higher rental rate now? I figure the tenant owes me for the rents for the next 8 months anyway but I can still get a higher rate once someone replaces him. Is that okay to do? Also, I want to charge him a fee for breaking the lease.
Can I do that?
A. There are a few different issues that need to be addressed here. First of all, the Landlord Tenant Code does allow for a concession to you the landlord if a tenant decides to not honor the terms of their lease. They would be responsible to pay rent for the remainder of the lease or some portion thereof until you secure a new tenant. The law reads:
521-70 Landlord’s remedies for absence, misuse, abandonment and failure to honor tenancy before occupancy (d) If the tenant wrongfully quits the dwelling unit and unequivocally indicates by words or deeds the tenant’s intention not to resume the tenancy, the tenant shall be liable to the landlord for the lesser of the following amounts for such abandonment: (1) The entire rent due for the remainder of the term; or (2) All rent accrued during the period reasonably necessary to re-rent the dwelling unit at the fair rental, plus the difference between such fair rent and the rent agreed to in the prior rental agreement and a reasonable commission for the renting of the dwelling unit. This paragraph applies if the amount calculated hereunder is less than the amount calculated under paragraph (1) whether or not the landlord re-rents the dwelling unit.
Paragraph #2 is saying that you would need to re-rent the unit at fair market value. You are saying that you rented the unit out $200 below market value the last time around and now you want to increase the rental rate. There are a couple of issue involved here. First of all, it may take you longer to re-rent the property at the higher price. Your current tenant may take opposition to that since they are obligated to pay you rent until you get a new tenant in. Also, you may need to justify that the rental rate was indeed below fair market value in the event that your tenant takes you to small claims court citing that they had to pay for a longer period of time due to the increased rental rate. A judge may take the side of the tenant in this instance.
Lastly, you would need to have the charge for breaking a lease already written into the special terms of the rental contract. The Landlord Tenant Code doesn’t address fees for breaking a lease but the amount charged would need to be “reasonable”. This applies also to charging late fees or interest – they always need to be a reasonable rate (however, late fees no more than 8% per the new law).
It might be better to just re-rent the property at the current rate, work on securing a new tenant at the earliest possible time and increase the rents later on.