Breaking a lease in Chicago (or anywhere else) before the end of its term is risky and you should always consult a lawyer knowledgeable in Chicago landlord-tenant law before attempting to end your lease. This article aims to provide general legal information (and not advice specific to your situation) about breaking a lease in Chicago.
Most leases in Chicago are for a one year term, often with a summer starting and ending date. This is a good arrangement for both landlords and tenants because the term provides certainty and moving in the summer is far easier than in the winter. This article will focus on yearly leases as ending a month-to-month lease before the end of its term doesn’t come up often.
In any discussion about tenants’ rights in Chicago, including breaking a lease in Chicago, we have to address the applicability of the Residential Landlord and Tenant Ordinance (“RLTO”).
The RLTO is the primary source of renters’ rights law in Chicago. It applies to most apartments in Chicago, but does not apply to suburban Cook County. The largest exception to the RLTO is for owner-occupied buildings that contain less than 7 dwelling units. If your building has 7 or more units, the RLTO likely applies and if you live in a smaller building where the owner lives somewhere else, the RLTO probably applies. For a lengthy discussion of the RLTO, click here.
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Send Me the EbookBefore discussing ways to end a lease, it is important to understand what happens when a tenant stops paying rent and moves out (this is not an article about eviction).
When a tenant and landlord execute a written yearly lease, the tenant is promising to pay monthly rent for the term of that lease. The obligation to pay monthly rent does not end simply because a tenant moves out and turns over the keys.
If a tenant in Chicago stops paying rent and moves out (abandons the unit) the landlord has a duty to make reasonable efforts to find a new tenant, we call this mitigating the landlord’s loss. The landlord then has a claim against the abandoning tenant for rent for the entire remaining term, plus costs of mitigation (advertising ect.), minus rent obtained from the new tenant. This is best illustrated by way of example.
Landlord and Tenant sign a one year lease for a Chicago apartment at a rental rate of $1000.00 a month, Tenant has an obligation to pay $12,000.00 over the course of a year. Tenant then gets a new job in New York, and moves out at the end of month 6 leaving the apartment in pristine condition and returning the keys to Landlord. Landlord hires a real estate agent to find a new tenant (as is his common practice) and a new tenant is found at the end of month 7. However, the new tenant is only paying $800.00 a month as the rental market is softer in the winter. Landlord pays the real estate agent their one month fee and asks Tenant to pay for Landlord’s loss.
In this scenario, the rent for the entire term was $12,000.00, Tenant paid $6,000.00 while he lived there and Landlord recouped $4,000.00 from the new tenant. Landlord lost one full month of rent and also had to pay $1,000.00 in marketing costs to the real estate agent. Liability would be ($12,000-$6,000-$4,000+$1000) = $3,000.00. Thus, Landlord would have a claim for $3,000.00 against Tenant and could sue Tenant in court if Landlord chose to do so.
There are several options to consider when deciding how to break a lease, they are:
Breaking a lease by written agreement with the landlord is by far the best option. The reason this option is superior is because the rights and remedies of the parties are resolved with finality and, if properly drafted, nothing will haunt the tenant in the future.
Some landlords are very understanding and willing to terminate a lease early, especially if the tenant gives advance notice and the termination occurs in the summer months. Landlords may simply release the tenant from the lease, attempt to negotiate some financial compensation, or request that the tenant find a suitable tenant so the landlord can re-rent the apartment.
In Chicago tenants often have some financial leverage if the landlord has violated the RLTO. When a tenant has claims for financial recovery under the RLTO, the tenant may be able to negotiate full or partial release of these claims in exchange for lease termination.
If a tenant has to break their lease, they should discuss their options with their landlord as soon as possible. If the parties come to an agreement, it must be in writing and ideally drafted by the tenant’s attorney.
We are seeing more and more leases that contain buyout clauses. These clauses are especially common when the landlord is a large corporation. Buyout clauses commonly give the tenant the option to end their lease early for the payment of a fee – usually equal to two or three month’s rent.
In some cases the buyout fee is excessive, but, if the tenant has no other options, it minimizes their risk. If a tenant intends to exercise a buyout clause, they should first have an attorney read it to make sure that the landlord is giving up their right to sue the tenant for unpaid rent. After review, the attorney can draft a settlement agreement properly breaking the lease.
Tenants in Chicago have the right to sublease if the property is subject to the RLTO. A landlord can require permission for the tenant to sublease, but that permission may not be unreasonably withheld. Essentially, the tenant may sublease, but the landlord can require that the new tenant has a source of income, decent credit score and no criminal record.
Subleasing (as opposed to re-renting) is when the original tenant becomes the new tenant’s landlord. The original tenant signs a lease with the new tenant, collects rent from the new tenant, and continues to be obligated to the original landlord for rent payments and damage to the property.
Subleasing in Chicago is strongly discouraged. Being a landlord in Chicago is not a casual endeavor as there are many laws that must be followed and evicting a subtenant can take months. The original tenant is putting their own financial well-being in the hands of someone they don’t know. If the new tenant stops paying rent, the original tenant may be sued. If the new tenant destroys the property, that is also the original tenant’s responsibility. Moreover, when the original tenant becomes a landlord, the original tenant has to comply with the RLTO, something that even professional landlords find difficult.
Re-renting is different than subleasing and is much preferred. A lot of landlords and tenants use the term interchangeably, so it is important to clarify what the landlord is willing to agree to. Unlike subleasing, landlords are not required to re-rent under Chicago law.
Re-renting is when the terminating tenant finds a new suitable tenant for the landlord and the landlord terminates the lease with the old tenant and signs a new lease with the new tenant. The old tenant is then absolved of all liability under the original lease. Most landlords that say they will allow the tenant to sublease will also allow a re-lease as it simplifies the relationship.
