With job losses, changes to remote work, and other hardships and life changes caused by COVID-19, many tenants are requesting lease modifications. A lease is a binding contract, so landlords don’t necessarily have to agree. However, there are business and legal issues that landlords should consider.
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What do I do when my tenant wants to change their lease due to COVID?
The first thing you should do is ask your tenant why they want to change their lease. Are they unable to pay, moving for a new job, or some other reason? That may direct how you decide to proceed.
For example, many corporate landlords with properties in different cities will allow a tenant who is moving to transfer their lease to a different property in a new city. Even if you’re a smaller landlord, you might have a vacancy closer to a tenant’s new job or that better meets their current needs. If the tenant is unable to pay their rent, keeping them in their lease may only add to a debt that you may never collect.
Once you’ve figured out what your tenant needs, figure out what you need. Do you want to fill a different vacancy, lock them into a longer term, or provide a temporary concession to an otherwise valued tenant you think will stay long-term?
What lease modifications can you offer?
There are a number of different ways to modify a lease provided both parties agree. Most modifications include combining something that benefits the tenant with something that benefits the landlord. However, landlords may make goodwill gestures or decide to cut their losses.
- Early termination
- Rent concessions
- Change in the rental rate
- Extension of term
- Allowing roommates
- Transfer to a different property
How do I limit my exposure when my tenant wants to move out early?
If your tenant wants to move out early, you should be aware of your rights under the lease and local laws. Can you continue to collect full rent for the remainder of the lease without action, or do you need to try to find a replacement tenant? Also keep in mind that being owed a debt does not mean you’ll be able to collect it.
Alternatives to simply canceling the lease include:
- Charging an early termination fee consistent with the lease, local laws, or negotiations with the tenant.
- Allowing the tenant to assign the lease to a new tenant that you approve.
- Allowing the tenant to sublease.
Is it better to amend the current lease or write a whole new lease when a tenant wants a modification?
Legally speaking, signing an amendment generally becomes part of the current lease, so there is no significant difference between the two. If you decide to write a new lease, you would also need to sign an agreement terminating the prior lease. For smaller changes, such as extending the lease in exchange for a reduction in rent, you may want to sign an amendment or addendum. For larger changes, such as adding terms or changing multiple key provisions, signing a new lease may help keep everything clear.
What are the downsides to a lease modification?
The major disadvantage to a landlord in a lease modification is potential lost rent. This will depend on how long you expect the unit to remain vacant, the new rent you expect to collect, and potential losses from having a non-paying tenant stay on your property. This is a question of business judgment rather than a legal one.
In addition, you should also keep fair housing laws in mind. Many large landlords don’t allow modifications because granting one but denying another may lead to fair housing complaints. To avoid being accused of discrimination, you may want to write out a list of criteria you will use when considering lease modifications, such as job loss or change in income.To get legal help with lease modifications, you can ask a lawyer. For more information regarding COVID-19, visit The Rocket Lawyer COVID Legal Center.
This article contains general legal information and does not contain legal advice. Rocket Lawyer is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.