If a tenant has already signed a lease, and then decides he/she no longer wants the unit and doesn’t move in, is the tenant still legally responsible for rent payments?
The first question is whether or not a landlord-tenant relationship was created. This relationship is created by a contract between the parties. It can be called a rental agreement, a lease or a month-to-month agreement, and it may be oral or written. To be enforceable, the contract must show that the parties intend to create a landlord-tenant relationship, and it must: 1) designate the parties, 2) describe the premises, 3) specify the rent to be paid and the time and manner of payment and 4) specify the term for which the tenant will rent the unit. Of course, the exchange of rent, security deposit and receipts solidifies the creation of the relationship. Even though the tenant never took possession of the premises, as long as a true landlord-tenant agreement was created, you may be permitted to collect damages (including rent) from the tenant who announces that she/he does not intend to perform her/his obligations under the agreement, which is to move into the unit.
Once you have determined that a landlord-tenant relationship was created, you next look at the type of agreement you created in order to determine the amount of damages you can claim from the breaching tenant. If you simply have a month-to-month agreement, which can be terminated by a tenant giving 30 days’ written notice of termination, the damages will likely be cut off after 30 days. Even if the notice is only oral, I would not suggest taking damages in excess of the 30 days. If you have created a term lease (for example for a term of six months or a year) in which the tenant may not terminate the tenancy prior to the expiration of the term without cause, you may have a claim for damages for the entire term of the tenancy. However, you must always do your best to mitigate your damages by immediately looking for a new tenant once the original tenant has breached, otherwise the tenant will have a defense against your claim for damages. Your costs for locating a replacement tenantfor example, newspaper ads, and property management feesshould also be recoverable from the breaching tenant.
Of course, collecting the money from the departed tenant could prove difficult, unless you are already holding the first month’s rent and/or a security deposit. You could deduct the rent actually lost as a result of the breach from the rent or security deposit held. However, according to Civil Code Section 1950.5, you are required within 21 days of the tenant vacating (in this case, 21 days from the time the tenant gave notice that he/she does not want to move in), to either return the security deposit or provide a written explanation as to any retention of the security deposit.
Should the unit remain vacant for a period beyond the 21 days, despite your best efforts to re-rent it, you will have to recover those excess rental losses along with the other non-rent costs you have incurred in a separate court action against the breaching tenant. Remember, you can only take a maximum of 30 days’ rent anyway for a month-to-month agreement. For a term lease, if you are forced to rent the unit for less than the contract price, the tenant may be responsible for the difference in rent due for the entire term of the tenancy (there should be a specific term in the lease covering this issue). For example, you have a one-year contract for $2,500 with a tenant who then tells you she/he is not moving in. You have done your best to find a new tenant, but given the market, the second tenant is only willing to pay $2,300. The first tenant is then liable for $200 per month for a year ($2,400). Assuming you re-rent the unit prior to the 21-day deposit return period, you may be able to include the rental difference in your explanation and retention of the deposit. Otherwise, it will have to be the subject of a separate court action for damages. To be certain that you are taking the proper course of action, you should always consult an attorney prior to retaining any monies paid by a tenant who never takes possession of the unit.
By Sally Morin and James M. Millar of Millar & Associates (415)981-8100.