The Consequences of Terminating Apartment Leases
- Upon renting an apartment and signing a lease agreement, many landlords collect a security deposit, which is typically equaled to one month's rent. After moving out of the apartment, landlords usually return the security deposit after a walk-through of the property. The costs to repair any damages to the property are often deducted from the deposit. But if you walk away from an apartment lease early, the landlord can keep the security deposit -- and some use this money to cover the rental costs until a new tenant moves in.
- Because you signed the rental agreement and agreed to pay a certain amount for a specific time period, landlords can seek legal action. They may hire a collection agency to recoup the monies lost due to breach of contract, or they may file a case in small claims court. If found guilty in a courtroom, you're responsible for the remaining lease balance. For example, if you move out of the apartment with four months left on the lease, a court may require you to pay four month's rent.
- Terminating a lease agreement can appear on your credit report. Some landlords do not report rental history to the credit bureaus. But if you are evicted from an apartment, or if you terminate an apartment lease early, landlords may report this information. Having this negative information on your credit report can lower your overall personal credit score, especially if the court places a judgment on your report for nonpayment of the lease. Judgments can stay on credit reports for up to seven years.
- One big consequence of terminating an apartment lease is the inability to find new housing. Once an eviction or breach of contract appears on your personal credit file, other landlords may hesitate to approve your rental application, and mortgage lenders may reject your application for a home loan. Your options are limited, and finding a new rental may require negotiating. For example, you can offer to have a cosigner on the rental agreement, pay a higher rent to sign a month-to-month agreement or submit a higher security deposit.
