Lease termination fees (CA) (apartment, breaking a lease, tenants, renters)

[TenantInTrouble]

Hi,

Our current lease is due to expire soon. New lease terms involve a "lease termination fee" of around $5000 (roughly 2 months' rent) AND a month's notice - so basically if we broke the lease, the landlord (a publicly traded company) gets to keep 3 months' rent as compensation.

Oh, and they also want us to execute an ACH agreement with them.

Needless to say, I am in a state of shock. Is there any limit (under state law) to the dollaer amount of lease termination fees that a landlord may charge ? (The city we live in also has NO RENT CONTROL).

TIA.

[clongirl]

Originally Posted by TenantInTrouble

Hi,

Our current lease is due to expire soon. New lease terms involve a "lease termination fee" of around $5000 (roughly 2 months' rent) AND a month's notice - so basically if we broke the lease, the landlord (a publicly traded company) gets to keep 3 months' rent as compensation.

Oh, and they also want us to execute an ACH agreement with them.

Needless to say, I am in a state of shock. Is there any limit (under state law) to the dollaer amount of lease termination fees that a landlord may charge ? (The city we live in also has NO RENT CONTROL).

TIA.

If you give the landlord adequate notice that you'll be moving out (generally 30 days- read your original lease agreement) there really shouldn't be any problem getting your full deposit back. They are legally allowed to remedy faults in rent payments, to clean, or to repair damages by withholding the amount which is reasonably necessary and must return the remainder within 3 weeks.

Legally, the security deposit cannot exceed 2 months rent (I'm not sure where you're getting the 3 month figure).

As for an ACH agreement (I'm guessing this means an automatic payment?) ...I don't think it's legal for them to demand you to pay this way, but it's much easier for them to ensure that rents are paid reliably, especially if it's a large multi-unit property.

So, don't break the lease by not giving them adequate notice and clean the premises to the standard that you moved into and you should be returned the full amount.

[ambient]

Originally Posted by TenantInTrouble

Hi,

Our current lease is due to expire soon. New lease terms involve a "lease termination fee" of around $5000 (roughly 2 months' rent) AND a month's notice - so basically if we broke the lease, the landlord (a publicly traded company) gets to keep 3 months' rent as compensation.

Oh, and they also want us to execute an ACH agreement with them.

Needless to say, I am in a state of shock. Is there any limit (under state law) to the dollaer amount of lease termination fees that a landlord may charge ? (The city we live in also has NO RENT CONTROL).

TIA.

This sounds pretty normal to me. Financial penalties for breaking leases are standard as far as I know. Most landlords require notice as well. Not an expert in it, but I believe the limits are around the number of months landlords can charge. I think the limit in our neck of the woods is 3 months; many do 2. Rent here is really high; ergo, your penalty for breaking the lease will be a lot of $.

[TenantInTrouble]

Originally Posted by ambient

This sounds pretty normal to me. Financial penalties for breaking leases are standard as far as I know. Most landlords require notice as well. Not an expert in it, but I believe the limits are around the number of months landlords can charge. I think the limit in our neck of the woods is 3 months; many do 2. Rent here is really high; ergo, your penalty for breaking the lease will be a lot of $.

Hi,

Do you know where I could find information on the limit to the number of months the landlord can charge ?

It doesn't matter if you lose your job, go through a divorce or even die - you (or your spouse) will still be on the hook for a lot of $$$$.

Can't wait to escape the Bay Area.

[NoMoreSnowForMe]

Lease termination fees are illegal in CA. I retired from an apt mgr job in Santa Clara last year.

What they can do if you break your lease in CA, is charge you rent until they find a new tenant, plus advertising fees. It's called a duty to mitigate damages. There can be no non-refundable fees in CA.

What you can do is go ahead and sign it, but they can't enforce it. So, if you just don't want to make waves now, sign it, and if you have to break your lease, and they try and enforce this clause, you can go to small claims court and you will win. Any clause in a contract that is contrary to state law, cannot be enforced.

In fact, you could probably get them to back down without even having to go to court, by showing them the law and that they will lose in court and also have to pay your legal fees and maybe even punitive damages, if the judge thinks they did this in bad faith.

Bottom line is you can sign it, and they can't enforce it, even if you sign it.

I just moved into a senior apt bldg and the lease also has non-refundable fees that I know they won't be able to enforce. I went ahead and signed it because I didn't want the delay of the manager having to contact the corporate office, yatta yatta. When I move out, I'll fight them on those clauses and I'll win.

Here is a legal article that explains this, and even includes a sample letter to a landlord (California):

Breaking a Lease and Leaving Early | Nolo.com

This is the section of law regarding a landlord's duty to mitigate damages:

California Civil Code Section 1951.2 - California Attorney Resources - California Laws

I also found this question answered by an attorney, so you can feel confident in my answer:

Apartment Lease Termination Fees | Legal Advice

The management company either doesn't know the law in CA or hopes their tenants don't know the law. But, they can only charge you their actual out-of-pocket losses due to your moving out early. They would have to prove they lost $5,000+ even though they made a diligent effort to find a new tenant, and show their actual advertising costs, etc., too.

I'd also say no to the ACH. I'd ask them if there was an online payment option. But, I would never give them access to my bank account. If they make an error and double hit my account, for instance, that could wreak havoc.

I am not aware of it being illegal for them to require this in order to do business with them, though. I just don't know. If they insist and you don't see any way around it, I'd set up a separate bank account just for the rent, then only leave say $5.00 in it except when you move money into it in time for the rent to be paid. And set up the account with the bank, that if there are not enough funds in the account when a charge comes in, that the bank reject the charge.

[NoMoreSnowForMe]

I found another attorney answer regarding the ACH payment requirement. Basically, since it's not illegal to require it, it's legal. You can choose to not enter into a contract with him. He can't require it as a new requirement after you've entered into a lease, but he can put it into your new lease and you can choose to move, basically.

Is It Anywhere In America Legal To Require Automated Payments (ach) For Housing? - Quora

The answer is by a California attorney (in Oakland) regarding the law in CA.

[STT Resident]

Originally Posted by NoMoreSnowForMe

Lease termination fees are illegal in CA.

I believe that's incorrect. I believe it's legal for a rental lease in CA to include a lease termination fee clause. This is not the same as a non-refundable deposit.

[NoMoreSnowForMe]

No, the law is clear that a landlord can't get away with a non-refundable fee of any kind in CA by calling it something else. Any and all fees come under the security deposit law and are treated as such.

And since the landlord has a duty to mitigate damages in CA, he has to prove the amount he charges for a lease break fee, is his actual out-of-pocket losses, and also prove he tried to minimize those costs.

If you'll read the links above, the answers and articles are by California attorneys. You may want to read this one in particular, if you don't want to learn all of the law, etc.:

Apartment Lease Termination Fees Not Legal in California