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QUESTION:
We just signed one-year lease agreement and few days after the effective date, the tenant sent us a medical letter showing she is not able to work for indefinite period. The tenant asked us to terminate the agreement and refund the first and last month deposit received upon signing. The tenant didn’t pick up the keys and didn’t move in.
Currently, the lease agreement binds the tenant to one year term, however we are willing to sign a termination addendum. In this respect can we keep the he first and last month deposit received upon signing plus at least one additional month, to cover the costs until we find another tenant.
ANSWER:
In Ontario, a lease agreement is legally binding, and generally, the tenant is responsible for the lease term unless both parties agree to terminate it. Since the tenant has not moved in and is requesting a termination due to medical reasons, you may consider drafting a termination addendum.
However, regarding the deposits, you cannot automatically keep the first and last month’s rent plus an additional month without the tenant’s consent. Typically, if you agree to terminate the lease, you should return the deposits unless you can demonstrate actual losses. It’s advisable to negotiate with the tenant on how to proceed, and possibly reach an agreement on a reasonable amount to retain to cover your costs until a new tenant is found. Consulting with a Paralegal could also help clarify your obligations and rights in this situation.
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