Rent Coach: Can my landlord make me pay to break my lease if I'm moving within the building?

Q. I have a one-bedroom apartment in a rental building and want to upgrade to a two-bedroom. I noticed that one just hit the market so I inquired with my landlord about renting it. 

However, my landlord wants me to pay to submit a new application and pay a $1,000 early termination fee to break my lease.

Is that fair? 

A. From a property management perspective it is wise for your landlord to require you to submit a new application and it is fair for them to charge a processing fee for that.

The two bedroom apartment that you are interested in leasing presumably has a higher monthly rent than your current one bedroom.  Your landlord will need to ensure that you are qualified to take on the additional monthly expense. You will likely need to make at least 40 times the new monthly rent in annual income in order to qualify.  A new review of your credit information is necessary to reveal any credit risks that didn’t exist at the time of your last application (e.g. a lower credit score). 

Your landlord is asking for an early termination fee because you are asking to break your obligation to rent your current apartment until the end of the lease term. As your lease pertains to your rental of a specific apartment as opposed to any apartment in your building, your landlord has no obligation to facilitate your desire to move apartments before your lease is up. 

That being said, the fee may be negotiable. Consider offering to find a replacement tenant for your one-bedroom before you stop paying rent for it.  If you can do that, the landlord’s vacancies go from one apartment to zero apartments and you might be able to avoid the termination fee in exchange for this. 

A few landlords permit current tenants in good standing to move to any apartment in their portfolio (even outside of the building the first apartment was located in). However, this policy is made known at the time of the lease signing.  The landlord uses this as an advertising tool to help attract tenants who will feel better knowing they can rent a smaller or larger apartment at any time if their circumstances change. 

Further, by working to accommodate the changing needs of their tenants, the landlord expects to lower their vacancy rate and minimize defaults and evictions (e.g. when a tenant loses their job they could downsize from a large one bedroom to a small studio rather than potentially defaulting on their lease obligations).  Though there are benefits to having such a policy, not every landlord is willing to adopt it and it tends to work best for property owners with a very large number of apartments.   

Mike Akerly is a New York City real estate attorney, landlord, and real estate broker. He is also the publisher of the Greenwich Village blog VillageConfidential.     

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