My Tenant Wants to Break the Contract, What Should I Do?

Tenant Wants to Break the Contract

Every landlord wants a long term tenant who also looks after the property. A good tenant ensures a property is a good performing investment asset, therefore the rental yield is impacted should a tenant break the agreement.

Most tenancies in Thailand are for 12 months with a tenant bound to pay the rent for this period. However, in some unexpected circumstances, a tenant might need to break the agreement early, which has happened more in the current climate due to the economic uncertainty created by COVID-19. Many tenants have been forced to take reduced salaries or leave the city entirely. 

What is the Thai Rental Law All About?

Depending on the negotiated terms there might be a break clause in the agreement allowing a tenant to terminate provided the required notice has been served. Where there is no break clause, there are several alternatives. 

It is advisable to see first if the tenant is happy to continue the tenancy on a reduced rent if the market is awash with rental properties as the reduction will likely outweigh any void in rents in between tenancies. Should they still wish to move then propose that they find a replacement tenant to take over the remainder of the term.

In situations where there is only a couple of months left of the current term, it is recommended to get the new tenant to sign up for a new 12-month agreement to save having to look for another tenant again soon.

Landlords can also help their tenants

Fortunately, Bangkok has a good stream of tenants consisting of students, millennials and expatriates who are not willing or in a position to buy a property. In some cases, they might only be here for a few months to carry out a secondment or work placement not wishing to commit to a 12-month tenancy and are in an ideal position to complete the remainder of an existing tenancy. The incoming tenant should pay the deposit to the outgoing tenant and also sign a new tenancy agreement understanding their obligations and expectations.

What types of tenants are there?

Landlords can also help their tenants by advertising the property and speaking with real estate agents. The cost of using an agent to find a new tenant should be borne by the existing tenant for the remainder of their term only. Explain this to the tenant and get their confirmation in writing to save any disputes. 

Lastly, a landlord has a right to the deposit should the tenant leave early where a replacement tenant has not been found. This should be detailed in the tenancy agreement and agreed between both parties but will help cover any shortfall in rent a landlord incurs.

 

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