TERMINATION OF A LEASE IF POSSESSION CANNOT BE GRANTED

Did you ever sign a lease with a resident for a unit that was currently occupied and the current resident had given notice to vacate? Of course. Most of the time the resident vacates as planned, you turn the unit, and the new resident moves in. What happens if the current resident decides not to move out as they had told you, and the new resident is in the parking lot with a truck ready to move in? You give the bad news that you have no other units available, and the would-be new resident drives away, STRAIGHT TO THE COURTHOUSE!

Common Practice It is common practice among property managers to attempt to rent a unit out once the current resident has given notice of vacating, you have given notice to the resident to vacate and/or the lease is expiring. This is not illegal in any way, and the property manager or owner often will sign a lease with the new resident, stating the occupancy date which will be some time after the current resident has vacated. In most cases, the current resident vacates according to plan, the property manager turns the unit, and the new resident moves in on the beginning date of the new lease. Often the property manager has the new lease starting a week after the current lease expires, so as to provide time for the necessary cleaning or other work to be done on the unit to make it rent ready for the new resident.

The Problem Many residents fail to move out on the date that they said they would vacate. The resident could have had a change in circumstances, is building a home which is not ready as expected, or the resident’s new residence may have fell through or is not ready for some reason or another. Can you just kick the resident out, as you have a new resident moving in? Of course not. Your only option is to wait for them to leave or file an eviction, which will most likely take 20 to 30 days. The property manager is now faced with a dilemma; in most cases, the resident will move out within a short period of time, but you have a new resident who has a fully executed lease who now cannot move into the unit. Another problem may not be related to the current resident at all. The current resident may vacate the unit as planned, but you find out that serious work must be performed on the unit to make it rent ready, or something serious like a rewiring job or replumbing job must be performed before a new resident can move in. In the situation of the current resident failing to move out, the current resident is in breach of the lease by not moving, but YOU are now in breach of the lease with the new resident, as YOU cannot provide the unit to the new resident according to the terms of the lease. In the situation where major work needs to be done, the current resident is out, but YOU are still in breach of the agreement with the new resident.

The Liability If the new resident cannot move in according to the starting date of the lease, the property manager has breached the agreement and could be held liable for the damages the new resident suffers due to the breach. This could include storage costs, the higher rent the resident may have to pay finding another place, hotel bills, moving bills, and any other possible expense that could arise out of the new resident now not being able to move in as planned. The resident may even go as far as suing for infliction of emotional distress or claim some bizarre theory of damages.

The Solution A simple clause in the lease agreement is all that is required to give the property manager and owner protection in the event the unit is not ready for the new resident as planned. This clause can provide that the lease may be considered null and void or terminated in the event that possession cannot be granted to the resident on the expected move in date, or provide that the move in date can be extended to a fixed date not to exceed a particular amount of days. Since nothing is certain in the world of property management, a clause such as this will prove extremely helpful and is really a necessity, if the property manager intends to enter into a lease with a new resident while a current unit is occupied. We recommend that this wording is placed in the same paragraph as the start and end date of the lease term.

Sample Lease Wording

IF FOR ANY REASON WHATSOEVER MANAGER CANNOT DELIVER POSSESSION OF THE PREMISES TO RESIDENT BY THE BEGINNING DATE, THE BEGINNING DATE MAY BE EXTENDED UP TO ____ DAYS OR LEASE VOIDED AT MANAGER'S OPTION WITHOUT MANAGEMENT OR PROPERTY MANAGER BEING LIABLE FOR ANY EXPENSES OR DAMAGES CAUSED TO OR INCURRED BY RESIDENT BY SUCH DELAY OR TERMINATION.