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When it finally comes time to buy a home, many things have to fall into place. You must be financially and emotionally ready. You have to find the right home, in the right neighborhood, at the right price. You need to make an offer and, of course, have it accepted. The point is, when all of the stars align, you need to be ready to make a move — which may not please your landlord.
If you live in a rental property, chances are you signed a lease. Whether that lease will end at the right time for you to buy a home is never guaranteed — which begs the question, should I break my lease to buy a house, if it comes to that? The answer depends on your unique rental agreement, your housing needs, and your financial situation. Let’s review what the process of breaking a lease to buy a house looks like and what you need to be aware of before you make that decision.
Why would you break a lease?
There are plenty of perfectly valid reasons to want to break a lease, some of which provide you with legal protections in the event your landlord chooses to sue you for doing so. You may want to move because the landlord does not maintain proper living conditions on the property, get away from a potentially violent situation, or relocate for a new job. None of us can predict the future, and while we generally sign leases in good faith, you may want to move before your lease ends.
Another reason renters may choose to break a lease is that they want to buy a house. Many apartments require tenants to sign a year lease to move in, and even if you know you want to buy a home in the next few months, you need somewhere to live while you search for the right home to buy.
How easy is it to break a lease?
It can be a challenge to break a lease without the permission of your landlord. Legally, if your landlord doesn’t support you breaking the lease, you don’t have many options unless you have a reason for breaking the lease backed by an extreme circumstance. If you need to move for military purposes, your apartment becomes inhabitable, or you’re a victim of domestic violence, you should be able to break your lease.
It’s crucial to pay attention to your specific state’s laws around lease-breaking, so you understand what your options are and what the consequences of breaking a lease may be.
Is breaking your lease worth it?
Even if you have to pay penalties, you may find that breaking your lease is more than worth it. Here are some pros and cons to consider when you make this critical decision.
Pros of breaking your lease
- Potential to earn compensation. If you want to break your lease because your landlord refuses to fix issues with the property, you have the option to go to court to ensure your landlord won’t sue you for breaking your lease. You may even have grounds to receive compensation.
- Making the best choice for you. Depending on what type of fee your landlord may assess for breaking your lease and what your budget looks like, breaking your lease may be the right choice for you when it comes to your living situation. For example, breaking your lease so you can move for a new job with a better salary may balance out any fees you may need to pay the landlord.
Cons of breaking your lease
- Your landlord could sue. If you move out and don’t pay your outstanding rent on your lease term, your landlord may try to sue you. In many states, landlords must make an effort to re-rent a unit that became vacated before the lease expires, so again it’s important to know what the laws are in your state.
- You can damage your credit score. A lease is a legally binding contract and your landlord can report you to credit bureaus if you fail to honor your lease agreement. They may also send a debt collection agency after you if you don’t pay your remaining rent payments which is tiresome and damaging to your credit score.
- You risk the loss of your security deposit. It depends on what your rental agreement looks like, but your landlord may be able to seize your security deposit if you break your lease.
- You may have to pay fees. Even if your landlord decides to let you out of your lease early, they may require you to pay them an early termination fee.
How to break a lease
If you decide to break your lease, you need to carefully consider all of the options you have to get out of your current lease. To start, consider letting your property manager or landlord know your plans. It’s a good idea to read through your lease agreement carefully to better understand the rules in place about your lease. Your landlord may allow this in certain circumstances (for example, if you are able to find a suitable replacement tenant) or they may be firmly against it, so review your lease agreement first so you have an idea of what to expect when you broach this conversation.
A few common clauses and potential paths forward can help you get out of a lease.
Enact a home buying clause
Some leases include a home buying clause in the agreement that allows you to terminate your lease early after you buy a home, as long as you provide the landlord or property manager with the agreed-upon amount of notice. It isn’t guaranteed that your lease will have this clause, but if you’re breaking your lease because you bought a home, it’s worth doing some research.
Buy your way out
You may be able to buy your way out of a lease agreement if you pay an early termination fee. Typically, this fee costs about a month or two’s worth of rent alongside a penalty fee for breaking the lease.
Switch to a monthly agreement
If you know far in advance that you may not be able to ride out your entire lease agreement (which is likely if you know you want to start house hunting), you should warn your landlord and request they switch your lease agreement to be monthly instead of annually. When you have a month-to-month lease, you only have to stay in your lease for a month at a time instead of a full year. You may have to pay a bit more each month in rent when you are month-to-month, but that cost may be worth the flexibility you’ll gain.
Appeal to your landlord
If you give them enough of a heads-up about your plans to move before your lease ends, your landlord may work with you to help find a solution that works for both parties. For example, if rentals are in high demand in your area, they may be able to find a new tenant.
While it may be tempting to hide your plans from your landlord or property manager, being upfront sooner rather than later if you plan to break a lease is the way to go.