Most landlords get their tenants to sign a minimum one-year lease. This is usually done to give them some peace of mind, knowing their rental properties will be occupied for at least 12 months. What most landlords don’t realize, however, is that one-year lease agreements don’t hold much weight. In Ontario, tenants can break their leases with relative ease.
Though a lease agreement is considered to be a binding contract and a tenant is obliged to stay for the term agreed to, there is very little landlords can do to stop tenants from walking out on them. Landlords are baffled by this because at face value it seems as if the law is on the landlord’s side. Technically speaking, breaking one's lease is not something a tenant can arbitrarily do.
There are only three circumstances in which breaking one's lease is condoned by the Ontario Landlord and Tenant Board:
The Board issues an order ending the tenancy agreement early because the landlord has not met their obligations under the Act,
The landlord allows the tenant to assign the rental unit to someone else.
The landlord agrees.
Despite all this legislation in place, the reality is that tenants can walk away from their obligations without much consequence to themselves. Sophisticated tenants have found loopholes that allow them to back out of their commitments easily.
For example, if a landlord refuses a tenant’s request to break her lease that same tenant could request an assignment. By assigning a lease, a tenant is finding a new tenant to take over their tenancy.
Most landlords are oblivious to the severe consequence of ignoring or denying a tenant’s request for assignment. If a tenant does not hear back from a tenant within seven days of requesting an assignment, that same tenant can file to terminate their lease on the eighth day or thirty days from making such a request.
If tenants know their landlords are going to refuse an assignment, they could strategically file a request for one so that the refusal given would substantiate their right to leave. In cases where the landlord agrees to an assignment, a tenant who signs a qw-month lease is not really bound to that lease, so long as he is willing to find a new tenant for the landlord.
According to the Residential Tenancies Act, landlords are supposed to do everything in their power to mitigate their losses when a tenant breaks his lease. But finding another tenant is no small task. It takes countless hours to advertise a rental property, screen prospective tenants and show it to interested parties.
Though a landlord could pursue an unlawful tenant for damages through small claims court, many landlords choose not to. They prefer to avoid the hassle of going to court and focus instead on finding a better tenant.
Perhaps that is a smarter move. After all, the best way to insure against being a victim of another tenant who breaks their lease is to source out a better one. Good tenants who sign a one-year lease are bound to honour it.
Freedom Malhotra is an experienced real estate investor and Realtor. He is the founder of Condo Planet, specializing in Mississauga condos.