How much does it cost to break a lease?

Legal and financial implications of breaking a lease

When you moved into your rental property, you signed a lease agreement with your landlord. In this contract, you agreed to pay rent for a set period of time in exchange for the guaranteed upkeep of a safe, habitable property.

As soon as you signed on that dotted line, you were legally obligated to fulfill your end of the bargain: paying the lease in full. If you break that contract by moving out early, you’ll likely face legal and financial consequences, depending on the situation.

1. You probably have to pay a fine. Your lease probably explicitly states a dollar amount you have to pay in the event you break your lease (typically equal to a few months’ rent). This varies by contract but usually isn’t cheap.
2. If you don’t pay your fine, your landlord could sue you. If you can’t afford to pay the cost of breaking your lease, your landlord could take you to small claims court to try and recoup their money. As long as you abide by whatever is set forth in your contract regarding the process of breaking a lease, you should be able to avoid the court system.
3. Failure to pay could damage your credit score. If the landlord has to send a debt collector to try and recoup their losses, it could negatively impact your credit score. To avoid this, pay all the associated fines and debts before it’s too late.
4. Breaking a lease could impact your ability to rent in the future. Future landlords may contact your previous landlords to learn more about you as a renter. Breaking a lease in the past could be a red flag that results in a denial of your rental application.

That’s all to say that what happens financially when you break your lease depends on the situation. If you’re breaking your lease for a legally justifiable reason, such as a military deployment (more below on that and other legally justifiable reasons to break your lease), you may be able to avoid all of these implications. But if you’re simply moving for personal reasons, don’t be surprised to find out that the cost of breaking a lease is steep.

So before you hire a moving company, make sure you understand all the implications associated with breaking your lease.

Understanding your lease agreement

It’s not uncommon for renters to simply skim their lease agreements before signing. Although lease agreements are typically long, boring and complicated, they are actually very important to the rental process because they protect both the renter and the landlord.

Jonathan Feniak, general counsel at LLC Attorney in Denver, Colorado, says you’ll find the answer to how much it costs to break your lease in this agreement. Feniak specializes in property law and works with many clients in this situation.

Type of rental agreement

Traditional rental agreements are for a certain period of time (like 12 months) and must be renewed before the year is up to guarantee lodging for another year. You most likely signed this type of agreement.

But there are also other types of rental agreements, like month-to-month, short-term, rent-to-own and sublease agreements.

Your penalty for breaking a lease could vary depending on the type of lease you signed.

Duties and obligations

The lease agreement also outlines the specific duties and obligations of both the landlord and tenant. For example, landlords are legally required to provide a safe and habitable property for their tenants. This requirement includes factors like ensuring running water, access to power, secure windows and doors, and no pests or mold.

If the landlord fails to meet their obligations, you could have a good legal basis for terminating a lease for cause—meaning you wouldn’t have to pay any termination fees.

Early termination clause

The contract will also explicitly state what will happen if you break a lease before the contract length is up, in what is called an early termination clause. Feniak stresses that this is the most important part of your contract to review when considering breaking your lease.

“An early termination clause is a section in a lease agreement that outlines terms under which the lease could be terminated before the lease period expires,” Feniak said. “Knowing the ins and outs of this clause is essential as it often includes conditions under which an early termination is permitted and any associated fees.”

There are three main ways contracts usually structure the cost of breaking a lease, according to Feniak:

• Early termination fee: The best-case scenario is that your contract simply outlines an early termination fee. This fee is typically equal to a few month’s rent.
• Apartment lease buyout: Some contracts may require that you pay the rest of your lease in full. Depending on how many months are left in your contract, this could add up to quite a hefty sum.
• Lease and security deposit buyout: The worst-case scenario is that your landlord requires you to pay the remainder of your lease and forfeit your entire security deposit. If that’s the case, you could be out quite a bit of cash by breaking a lease.

These aren’t the only fees you may have to pay, though. The contract could also require you to cover the cost of cleaning the apartment or the price of advertising to secure a new tenant. Your legal and financial liabilities all depend on your signed contract and what both parties agreed to.

When you first see a contract upon initiating a rental, there are certain things to pay close attention to when reading it over. “Clauses that demand excessive penalties or those that are overly restrictive can be red flags, signaling that negotiating an exit could be more challenging,” Feniak said. He also warned against leases with vague clauses, as they can be harder to challenge when the time comes.

That said, Feniak told us there are some justifiable reasons for breaking a lease that are protected by federal and state tenant laws and won’t require you to pay anything out of pocket.

Common reasons for breaking a lease

There are many reasons why someone might break a lease. In some cases, these are justifiable in the eyes of the law; in others, you’ll still be on the hook for covering the costs outlined in your lease agreement.

Legal reasons for breaking a lease

Here are some reasons that may be considered justifiable depending on the situation and your state’s tenant laws.

• Unlivable conditions or landlord violations: Your landlord is required by law to keep your property relatively safe and habitable. If they violate those rules, like if they won’t fix a broken smoke alarm or a neighbor threatens you and a landlord refuses to evict them, you could be able to break your lease without repercussions.
• Health emergencies or disability: In some cases, state law may cover you if you experience a health emergency that results in a disability or something similar that makes it impossible for you to live in your current rental property.
• Domestic violence or stalking: Depending on the state, you may be protected if you’re a victim of domestic violence, stalking, harassment or assault by someone who lives with or near you. Protections vary from state to state, though, and are not covered federally.
• Change in active military duty status: The Servicemembers Civil Relief Act can help protect you from the costs of breaking a lease due to active deployment or relocation. This act applies to active duty members of the armed forces, National Guard members serving active duty status under federal orders, reservists called to active duty, and Coast Guard members serving on active duty.

Remember, though, that it's not as easy as just moving out. You’ll still have to show proof of your conditions and send written notice to your landlord (typically within 30 days of moving). If you simply move without proof or notification, even if your situation is valid, you could still be legally responsible for the fees associated with breaking your lease.

Illegal reasons for breaking a lease

There are also reasons why you may need to break a lease that aren’t justifiable in the eyes of the law — despite them still requiring you to vacate a property.

Here are a few common examples:

• Relocating for a job. Sometimes, job opportunities will take you to another city or state, causing you to break a lease. In most cases, needing to leave because of a job won’t qualify you for any sort of leniency on paying your termination fees. But, you may be able to negotiate with your new employer to cover some or all of the relocation costs.
• Buying a home or finding a better deal on a rental property. Unfortunately, it’s all about timing when it comes to buying a home or switching to a new property. If the timing doesn’t work out and you still have a few months left on your lease, you’ll need to budget termination fees into the price of moving.
• Changes to your personal situation. Most changes to your home life aren’t considered a legally justifiable reason to break a lease, like if you and your significant other break up or you lose your job and can’t afford your rental property.

How to lower the costs of breaking a lease

If you fall into one of the unjustifiable categories when needing to break a lease, you have a few avenues to explore to help lower the cost of breaking your lease. Communication with your landlord could be pivotal in finding a mutually beneficial solution, Feniak says.

Negotiate with your landlord

“Negotiation is about being prepared, presenting the facts clearly, offering solutions, and maintaining a professional and courteous demeanor,” Feniak said. “While each situation is unique, showing that you are reasonable and cooperative can often encourage the landlord to reciprocate.”

Depending on the situation, Feniak says there are a few ways you can prepare yourself for a tactful and productive negotiation process.

• Be kind first and foremost. At the end of the day, you’re asking for a favor from your landlord, Feniak says, so you should treat them with kindness. “In approaching the landlord, it's important to use clear, respectful, and empathetic language,” Feniak said. “I would start by expressing my appreciation for their understanding and the property they have provided. Then, I would explain my situation succinctly but with enough detail to show the necessity of my request.”
• Know your rights and be prepared to defend them. Most importantly, know what you’re liable for and what you’re not; that way, you can make a strong and factual argument backed by facts.
• Figure out if your landlord could earn more by letting you leave. You could do some market research in the area to see what the going rates are. If they’re higher than what you’re currently paying, it could incentivize your landlord to let you out of your lease to get a new renter in who is willing to pay more.
• Provide alternatives to leaving them high and dry. “I would come prepared to present possible solutions that could lessen the impact on the landlord, such as offering to assist in finding a qualified replacement tenant or being willing to pay a reasonable re-letting fee to cover the landlord's costs of arranging a new tenancy,” Feniak said.
• Lay out the alternatives to your landlord. If you simply won’t be able to cover the cost, let the landlord know that. Tell them what may happen if they don’t work with you to make a deal.

Find a lease transfer

If your landlord won’t allow you to break your lease despite your best negotiations, your next best option is to find someone to take over your lease.

Also called a lease takeover or a lease assignment, this is when you sign your full lease over to another individual. Unlike subleasing, where your name stays on the original lease, you’re completely off the hook once the contract is signed with a lease transfer.

Consider subletting

Some landlords prefer a sublease over a lease takeover because it’s less risky knowing you’re still on the lease. With a sublease, a sublessor signs onto your lease, agreeing to cover the cost. But if they fail to pay their portion of the rent, you are still on the hook as the main tenant.

Not all landlords allow subleasing, so check your contract to see if this is a viable option. If it is, be thoughtful about who you sublease to, as you have to trust them to keep their end of the bargain month over month.

Bottom line

The cost of breaking a lease depends greatly on your situation and whether your reasoning is considered justifiable in the eyes of the law. Unfortunately, if you’re moving out for an unjustifiable reason, you’ll likely have to pay a decent sum of money to break your lease.

How much you will owe depends on the original lease agreement you signed with your landlord. While this contract is legally binding, you may be able to negotiate with your landlord directly for a lower rate in exchange for helping them find a new tenant or subletter.

Regardless, it’s important you understand the implications associated with breaking a lease before you make any drastic changes to your living situation.