When does lease-breaker's rent duty end?

Rent it Right

By Inman News Feed
Add Comment Add Comment | Comments: 0 | Posted Dec. 8, 2011

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Rent it Right

Janet Portman
Inman News™

Q: My wife and I bought a house after signing a lease a few months ago. We understand that we're responsible for the rent until the landlord gets new tenants. He took a security deposit from a prospective renter, but then the renter backed out and the landlord returned the deposit. Are we still on the hook for the rent? --Jeff C

A: Renters in most states will be in the same boat as you when they leave a lease midterm, without a legally recognized reason for breaking the lease. The landlord must take reasonable steps to rerent the property. Once the landlord finds a new tenant, the original tenant bears no further responsibility for rent (this is known as the "mitigation of damages" rule).

In soft markets, where the property can't be rented easily, tenants could conceivably remain responsible for the entire term. If the landlord has been able to rerent only after dropping the rent, the original tenant can also be responsible for the difference between the original rent minus the new, lower rent, for the remaining time left on the lease.

Your question doesn't tell us for sure whether the new renter had actually signed a lease. Let's assume he had (most landlords won't collect a deposit before someone signs on the dotted line, and most tenants won't fork over that money unless they have secured the rental with a signed lease). In many states, too, landlords cannot collect a security deposit until a lease is signed.

Once a new lease was signed, your responsibility for future months' rent ended. The mitigation rule requires landlords to make reasonable efforts to rerent; it doesn't also include an ongoing obligation for the lease-breaking tenant to step up and cover the rent if anything goes wrong with the new renters.

Such a dramatic extension of the mitigation rule would have to be adopted by a state legislature. I'm not aware of any state that has gone down this road.

That the landlord returned the new renter's deposit doesn't change this analysis. In fact, if the new renter did not have a legally valid reason for backing out, the landlord was under no obligation to do so, as long as he could retain it consistent with his state's rules on use of the deposit.

These rules allow retention to cover unpaid rent, and here we have a whole year's worth of unpaid rent looming. The departing tenants are now in the position you were in -- they're obligated for a year's worth of rent, unless the landlord can find new tenants. The baton has been passed.

Q: I have a property management business that I've just started, and manage many apartments for a particular client. This owner has told me flat out that she doesn't want to rent to Hispanics, and has suggested ways to avoid even taking their applications (for example, she told me not to respond to phone inquiries from people who have accents). I know this is wrong, but I can't afford to lose this client. What should I do? --Tim A.

A: Even reading your description of the owner's policy makes me cringe, although logically I know that seeing those words in print doesn't give them any legitimacy. You are, of course, correct: Refusing to rent to people of a certain ethnicity is against federal law (and against state law, too), whether it's accomplished by an explicit refusal ("I don't rent to people like you") or indirectly, as your owner is doing.

There's even a legal term for your owner's methods: linguistic profiling, which happens when people make decisions based on the accents they hear at the other end of the phone.

Owners have been successfully prosecuted for fair housing violations based on their consistent negative treatment of people with accents, even when the owners have not officially adopted or announced a policy of discouraging such callers.

If the owner herself were the one taking applications and phone inquiries, she would be risking a lawsuit (or an administrative complaint). The risk to you is no less. Although you "work" for her, you are an independent contractor, responsible for your own misdeeds, no matter who has inspired them.

Here's what might happen: If an applicant were to contact a fair housing advocacy group and complain about his or her treatment, the group would probably use "testers" who have similar accents to make phone inquiries about rentals; they would also use testers without accents.

If they find that accented callers are routinely turned away, but non-accented callers are encouraged to pursue the rental, they'd have enough evidence to support a complaint against you.

You'd need to respond, and no matter whose orders you are following, you'd be the one in the hot seat. You'd be facing a fine and perhaps education classes on fair housing. Your business liability insurance policy will cover none of this.

Let's get back to the question at the end of your message: What should you do, given your desire not to lose this client? At the very least, respond to the owner by explaining the illegality of what she is doing, and the consequences to you if you're caught (it's also possible that the owner herself could be named in the complaint).

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