Why automatic rental termination fees are illegal

The story below describes a property management company that was automatically charging tenants a penalty if they moved out before their lease ended. While typically if you back out of a contract, which is essentially what your lease is, you still have to meet your obligation or pay to compensate the other party.

The reason a landlord cannot automatically charge the tenant the remainder of the lease amount or even a fee, is that if the landlord fills that unit, they will be making more than what they would have made under the contract. The landlord can only recover what they would have made if the lease / contract was fulfilled by the tenant.

But this does not mean you can just get out of your lease without risk. If you sign a one year lease, and move out before the end of the lease, you may have to pay the rent while you are not there. Your landlord will need to try to find another tenant.

A Portland-based property management company has agreed to stop automatically charging early termination fees when tenants leave an apartment before a lease is up.

According to Maine’s attorney general, Port Property Management typically charged tenants early departure fees of $600, even if it immediately re-rented the apartment. Attorney General Steve Rowe says automatic early termination fees can be illegal under Maine law if a landlord immediately finds a new tenant.

Under a court-ordered consent decree, Port Property Management also agreed to pay a $10,000 civil penalty and to refund money to tenants who were improperly charged early termination fees.

Port Property Management, which manages more than 700 apartments in Portland and South Portland, did not admit to any wrongdoing.

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