To Lease or Not to Lease
October 1, 2011
Due to a drop in my income I must move from California to Oregon. In Oregon I have a rental property with a lease that does not expire until April 30, 2012; however due to my financial hardship I need to live in my rental property. Can I break the lease for this reason? What costs can I expect to pay? Thank you.
Short answer, no, that is not a valid reason for breaking the lease. If the tenant doesn’t want to move, there may be no amount of money that would persuade him or her to live somewhere else, or that amount of money would be so huge that it would be cheaper for the landlord to live in a five-star hotel until the lease expires.
There seems to be a conception about tenants and the rental properties where they live that tenants live in those properties by the sufferance of their landlords. That is, landlords have the right to tell tenants to move whenever the mood strikes the landlords for any reason or no reason. That can be true. If tenants are on a month-to-month tenancy, in most states and cities, landlords can simply give a no-cause notice, and the tenants must vacate.
That changes with a lease. In order to terminate a lease, there has to be a reason, a reason that appears in the lease contract. And a lease is a contract. Both landlords and tenants are bound by its terms for the period of the contract. There is little more sacred in this country than the contract. Article I Section 10 of the US Constitution provides, “No State shall . . . pass any . . .Law impairing the Obligation of Contracts.” Contracts rank in importance a close second to freedom of the press, speech, religion and assembly. Without contracts being inviolable, commerce would be a hit and miss affair, subject to the whims of either party to the contract thus throwing business into a dark hole of instability.
Of course, as in this case, life happens. What is a rental owner to do if he or she needs to convert a property to personal use or take possession for any other reason during the term of a lease?
The obvious solution, where there is no advantage to either side with a lease, is the month-to-month tenancy—not use a lease at all. That way a landlord can simply terminate a tenancy, in some states with as little as a seven-day notice, but in most with a 30-day notice. And, as I mentioned before, the termination can be for any reason or no reason.
Is a lease an advantage to either landlords or tenants?
One argument is that the lease ensures the landlord will have a tenant for the term of the lease. However, I have heard from property managers, some of whom may have a reason to exaggerate, that half the tenants on a lease move out before the lease is up, leaving the landlord to chase them down for the defaulted rent. Some advantage a lease is in those circumstances.
In cities, such as Seattle, that have a “just cause” termination law, a lease is necessary to protect the landlord because a tenant can move out with 20-days’ notice but a landlord can’t terminate a tenancy except for “just cause.”
Many times tenants prefer a lease because they know the rent will not go up for the term of the lease. That can be an advantage for a landlord in that a tenant is more likely to rent a unit with a stable rent amount. A simple cure for that is writing into a rental agreement the guarantee that the landlord won’t raise the rent for at least a year. The goes the advantage of the lease.
The point is this. Leases are good for property management companies and tenants because they both seem to have some kind of guarantee about either income or rent. But how often are they good for landlords? Under specific circumstances such as city or state laws that prohibit landlords from terminating a tenancy except “for cause,” but allow a tenant to move out on a whim, they are almost essential for landlords.
But each landlord has to make his or her own decision. If a tenant insists on a lease, it would be wise to first ask him why he prefers one and second ask if he has ever moved out early on a lease. Landlords can also pay close attention to the length of residency in a tenant’s history. It costs at least a month’s rent for every vacancy, so a nomad isn’t much good as a tenant.
The decision to lease or not to lease can be one that requires careful consideration. Think long and hard before using a lease. Which side of the scales does the situation with the tenant and law push the decision?