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I am not the type who would want to break a lease, but here is the situation:
-I am renting an apartment (technically, a private owned condo) in Chicago
-I have discovered that not only is the landlord cash-flow negative every month, but is underwater on the theoretical market value of the property, compared to the amount she owes on the mortgage (I saw her mortgage documentation and I know what she owes - she owes $276K on the condo and the unit 2 stories up just sold for only $215K, another similar unit in the building also sold for $221K).
-I want to move out, to take a position in another city, the landlord agreed to let me leave as long as I found a sublessor (per Chicago law and per the rental contract), so I tried subleasing the unit, but was not able to successfully do so (the lease amount is high per square foot for this neighborhood, and the apartment is very small. It was a mistake for me to rent the unit, I did not realize how small it was when I saw it, when I moved in, only half of my furniture fits).
Given this information, is there any legal ground to break a lease in Chicago, based on the LANDLORD'S shaky financial situation? I never thought about the idea that one should run the LANDLORD'S credit, in addition to having the landlord run my credit. There is nothing that I am aware of, in terms of the landlord defaulting on the mortgage, but, I am curious if there is anything that will let me out of my lease based on this info?
I am not familiar with Chicago law, but the value of a property is only a loss if it is sold for less than owed. Otherwise, it is called a paper loss, which over time will correct with the housing cycles.
Negative cash flow can be a temporary thing as well, if the type of loan on the property is amortizing.
I do not think you have justification to be free of the lease on these two issues. It sounds like you are trying to find any excuse to not uphold your obligation...
...It sounds like you are trying to find any excuse to not uphold your obligation...
You are right, I am looking for legal loopholes to get out of the lease. If I cannot find one, and if I cannot find a sublessor, then I will continue to pay the rent and will occupy the unit/uphold all terms of the lease. But if I can find a loophole, and taking advantage of it is 100% legal and legit, then I will pursue it. I dont feel guilty about looking for loopholes; the landlord's father is actually a lawyer; I dont doubt for a minute that if THEY could find a loophole to bend ME over, that they wouldnt hesitate to utilize that to get extra money out of *me*. Especially since they are losing money on the monthly cash flow. Business is business.
There is more to the story about the landlord; I actually did find a sublessor who put down a security deposit, but the sublessor then "tricked" the landlord into giving her the security deposit back and the girl backed out of the deal, etc. Long story. There are some other questionable things going on, but nothing that I think I could use to get out of the lease early. I can describe these other things in another post.
Last edited by SmartGXL; 11-10-2008 at 08:31 PM..
Reason: Edit grammar
Who's to say she's in trouble simply because she owes more than the current market value of the house?
Well, as I mentioned before, I am not aware if any specific financial problems that she may be having, *other than* the fact that she is losing oney every month on the mortgage.
I guess the root of my inquiry here, is: would her negative cash-flow situation jeopardize me in any way, that would give me legal standing to get out of the lease.
I am not familiar with Chicago law, but the value of a property is only a loss if it is sold for less than owed. Otherwise, it is called a paper loss, which over time will correct with the housing cycles.
Negative cash flow can be a temporary thing as well, if the type of loan on the property is amortizing.
I do not think you have justification to be free of the lease on these two issues. It sounds like you are trying to find any excuse to not uphold your obligation...
Also Mugsy, I have to agree, she will not take a loss on the property until she actually sells it at a loss; she is curently "underwater" compared to other selling prices in the building, but it is true there is no loss yet. She is taking some loss on the ongoing maintenance costs, the association fees, the property taxes, and maybe some part of her interest paid to the bank.
She bought the condo 2 years ago, with the intent to flip it for profit, but just as she bought it, the housing market moved against her position and she was never able to sell, even at a break-even point. So, as time went by, it came time for her to get married, and with the small size of the apartment, there was no way for them to both move in here, and she was forced to try to rent it at a loss until (possibly years later) the market moves in her favor and is able to sell. Meanwhile, I am wondering if there is a statute or law that states that the landlord has to have funds on hand etc in order to maintain the property, otherwise it is a breach of contract and I can get out. It is a stretch I know, but it is so small it is almost unbearable, plus I want to move to another city.
I'm not a lawyer and I certainly don't know all the laws, but I can almost guarantee that there's no law on any books that says a landlord must make money on a rental. (I wish!) If she fails to maintain the property, you may have an out. Otherwise, unless you specified in your contract that she must maintain a certain amount of cash in her bank account....
She could even lose the property to the bank or sell it to someone else, and you'd most likely still be bound by the rental agreement you signed. You'd have to pay someone else, but you would still be on the hook, so to speak. You have an ownership in your condo. With that comes rights AND responsibilities.
If you want out as badly as you seem to, perhaps you can sublease it to someone for less than what you're paying. You'd have to make up the difference until the end of the lease, but at least you could move on.
Good luck! (And just be thankful your landlord is upside down on the mortgage instead of you.)
OP, You're kidding, right? The homeowner's finances are nobody's business for any reason. And, she offered you to sublet. And, your only complaint is that you misjudged the square footage. We're not talking about hidden cameras or rats here. Sounds like you are one of the few who actually have a decent landlord. Your only way out of this lease, probably, is to buy your way out. Either a payout to the landlord, or through prearranged fines. If you see her payment book laying around, intentionally look away. Some things you just don't want to know.
Her finances are no business of yours as your finances are no business of hers. You signed a legally binding rental contract and your sole obligation is to perform the contract. You have no legal standpoint whatsoever to try and mitigate your losses on your supposition that the landlord's finances are "shaky." Likewise your landlord would have no grounds on which to terminate her contract with you based on any similar supposition where your finances were concerned. Cheers!
Actually, if she is loosing money on the condos, she may be using the loss to offset gains in other areas on her income tax. She could be saving a bundle on taxes.
At any rate, you have a legal contract. Her financial situation has no bearing on your contract.
Just keep trying to find someone to sub-lease for you.
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