One of the issues that you are likely to face as a landlord is tenants breaking their leases. A tenant can simply walk away because he/she has found a new job, want to move to another the city, or plan to live with a significant other. Irrespective of the reason for the tenant wanting to move, you need to be cautious to minimize associated losses.
When landlords get new tenants, they usually ask them to sign a minimum of 12 months lease. This is meant to provide them with some peace of mind knowing that the premise will be occupied for the following year. However, Ontario tenants can break the leases with relative ease even though it is considered binding.
This post takes a closer look at the problem of tenant breaking a lease early in Ontario to answer two key questions: “When is the tenant allowed to break lease?” and “What the landlord should do when the lease is broken early?”
When is a Tenant Allowed to Break a Lease?
When a tenant signs a lease agreement, the expectation is that they will follow the agreed terms until it expires. However, the tenant is allowed to break the lease in the following situations:
- The tenant and the landlord reach an agreement allowing the tenant to break the lease.
- The tenant is running away from domestic/ sexual abuse.
- The Landlord and Tenant Board (LTB) issue an order that the lease is ended because the landlord has failed his legal obligation. Some of the things that could make the board allow the tenant to break the lease include unlawfully entering the rental apartment, withholding vital services, and harassing tenants.
- The tenant assigns the property to another person to continue until the end of the lease. In this case, you can refuse renting the unit to another tenant if there is a good reason such as a low credit score.
- If you do not respond to a tenant’s request to assign the rental space in seven days or reject a new assignment is enough to allow the tenant to issue Form N9 (Notice To End the Tenancy). The form should be issued within 30 days after the date of the request.
When is a Landlord Allowed to Break Lease?
Initially, the process of breaking the lease for landlords was easy. However, the process was applied dishonestly, especially when the house owners targeted leasing the houses at higher rates. In order to address such problems, the LTB introduced changes that allow landlords to break a lease only because of the following reasons:
- The rental unit is required by a purchaser or a family member.
- There is a need to convert, repair, or demolish the property for other use cases.
- The tenant fails to comply with the lease agreement. Some of these failures include non-payment or late payment of rent and being involved in illegal acts.
- The landlord can also enter into an agreement with the tenant to break the lease. When such an early lease break takes place, the landlord is required to fill out Form N11 (Agreement To End Tenancy).
What to Do If the Tenant Breaks the Lease Illegally
The Residential Tenancies Act allows the landlord to file a lawsuit when the tenant vacates the property without following the right process or breaks the lease. At this point, it is important to appreciate that the tenant owes you the rent for the house/apartment until the lease expires.
- You can insist that the tenant continues paying rent for the house until the lease is over or a replacement is found. This is a good method to use when the tenant is available and willing to pay.
- If the tenant has moved to another location where it is difficult to track them, consider following the info they shared when making the rental application. This is one of the reasons why landlords are encouraged to always verify the details that the client gives before signing a lease.
- Take the security deposit that the tenant paid at the start of the lease. Before new tenants can sign leases, they are required to deposit an amount that is equal to one or two months of rent. The funds are held by the landlord as security for using the property. If the tenant causes damage that requires repairs, the security deposit is used to cater for the cost. You should also seize the money to recover some of the months rent that the tenant broke the lease.
- Start looking for a replacement. Even as you try to track down the tenant, it is important to accept that they have already made a decision to move away. This implies that even if they agree to clear the cost of the lease for the remaining period, the property will still be vacant. Therefore, it is prudent to start looking for a replacement.
- Craft another lease agreement for future clients factoring in the worst case scenario. This means clearly outlining what will happen when the tenant breaks the lease. You could even engage the services of a real estate attorney to ensure that all gaps on the document are sealed and to emphasize the outcome.
If you are a landlord, it is prudent to understand the challenges that come with having tenants in your home. When the problem of a tenant breaking a lease in Ontario occurs, it is prudent to understand the available options. Here, the focus should be trying to make the tenant meet the cost for the remaining part of the lease while seeking to get a replacement.
It is also crucial to redefine how you will relate with other clients in case they break the lease. Make sure to emphasize the involved consequences so that only the right methods are followed when a tenant wants to break the lease.