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Lease Substitution Fees Explained

Substitution fees are a standard part of our lease agreements, but tenants are often confused about these fees. When our tenants find their own replacements, we are often asked why we charge a fee to add the new tenant to a lease. We are happy to explain!

Properly completing a legal lease substitution requires hours of administrative work. Lease substitutions are most common in ‘group house’ type rentals, and so communication and coordination with several individuals is necessary. Your lease substitution fee covers the cost of our work no matter how many potential new tenants we vet for you. Although they will each pay an application fee (which covers the cost of running their background, credit, and eviction reports), often there are cosigners, or multiple potential tenants to vet. You only pay the substitution fee once no matter how much work we do behind the scenes to qualify and secure owner approval for your substitute tenant and keep you apprised of the process.

The vetting process is only the beginning! We will also handle the legal documentation to completely release the outgoing tenant from their lease obligations. The outgoing tenant will also ‘pass on’ their portion of the security deposit to the new tenant, for which the outgoing tenant will usually request reimbursement. Legal release from your lease is no small matter. You may have heard stories of tenants moving out of group houses only to be contacted with an eviction filing months or years later when a new tenant defaults – this is a real risk when you are not properly released from your lease by a management company. We have an attorney-vetted substitution agreement that protects you and we make everything easier by using e-signature. $250 is starting to seem like a good deal, right?

But wait – our lease is about to renew anyways! Why can’t I just do the substitution as part of the renewal? Then the new tenant can be added and I can be removed, with no substitution fee, right?

In a ‘group house,’ all tenants are typically named on one master lease agreement. So why can’t you move out and just find a replacement when the lease renews? The reason is that you and your roommates are all jointly and severally liable to your lease agreement. This means that if there are four of you, we agreed to rent the home to all four of you, and qualified your applications as a group. Three of you cannot choose to renew without the fourth person, just as one of you cannot unilaterally end the lease agreement.

Thus, a lease substitution and lease renewal are separate matters. The lease substitution still requires the same amount of work, and must be ratified in the same manner, whether it is before, after, or on the same day as the renewal. The lease renewal is not a completely new lease. If we were to write a new lease with a new tenant substituted in, without releasing the former tenant from their lease obligations, the former tenant could demand their security deposit refunded from our company even if the replacement tenant had reimbursed them when they moved in. The security deposit laws in DC are very specific and our lease substitution process is designed to comply with them.

We work very hard to make your time in your home safe, happy, and as worry-free as possible. Properly handling lease substitutions is another way in which we protect our current and former tenants both legally and financially. We will make the process as smooth as possible so that you can move on to your exciting new chapter!

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