A large number of apartment communities utilize the Early Termination Addendum which gives the resident a choice of “damages” upon breaking the lease before the natural end of the lease.

If the resident chooses Option 1, the resident will owe a fixed amount, usually two months’ rent to the apartment community, in addition to any past or current rent owed and physical premises damages which may be attributable to the resident. Most residents, when they are given the explanation of the choices, choose Option 1, as it is in their best interest, since the apartment they vacate may stay vacant for quite some time, making Option 2 a much more risky venture.

A large amount of confusion occurs when the resident has been given a rent concession, chooses Option 1 and then breaks the lease.  

Concession Chargebacks

Most concession addendums or clauses have some form of chargeback provision in the event the resident defaults on the lease agreement by vacating before the end of the lease, either voluntarily or through an eviction.

One would assume that if the resident chooses Option 1, receives a rent concession and then breaks a lease, the concession payback can be charged in addition to the Liquidated Damages amount provided for in Option 1. This is INCORRECT. If the resident chooses Option 1, the liquidated damages amount is fixed to the one or two months’ rent that have inserted in Option 1. YOU CANNOT also charge the resident a concession payback.

Now you may be wondering why this is the case. The law is not clear on its face regarding this, BUT the legislative history of the law will show that the legislative intent of the bill passing process dealt with this. In attempting to get the Early Termination Law passed, early drafts and versions of the bill before it was enacted into law INCLUDED a concession chargeback. Through negotiations with the legislators and the Governor, it became clear that the Governor wanted concession chargebacks removed from the bill, or else he was going to veto the bill. The concession chargeback language was removed from the bill, and therefore it is fairly clear now that the liquidated damages are limited exclusively to the one or two months’ rent in Option 1.

While this does not seem fair for a resident to receive a generous concession, break a lease and then only be required to pay liquidated damages, the manager must understand that providing rent concessions are done at the risk of the apartment community. Give the gift, but don’t expect anything in return.

If you have any questions as to what you can charge, the best approach is to contact us for legal advice. You do not want to send an incorrect amount to collections and then up being sued later for this.

LAW OFFICES OF HEIST, WEISSE & WOLK, PLLC

“Serving the Property Management Professional”

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