Opt-Out Clauses in Rental Agreements

Opt-Out Clauses in Rental Agreements
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Rental agreements for apartments and similar properties are legally binding and thus must be very specific about the agreement between the tenant and the landlord or property manager. One area of specificity is opt-out clauses, which can cover a variety of aspects of the rental.

Types of Opt-Out Clauses

Two primary types of opt-out clauses are found in rental agreements. The first is the type that permits the tenant to move out of the rental property prior to the end of the lease. This type of clause is better known as a buy-out option. The second type of opt-out clause usually relates to rental insurance. In these cases, the clause means that the tenant voluntarily opts not to carry rental insurance for the property contained within her rental unit. Other opt-out clauses may let the tenant decline other privileges or amenities the landlord offers, but these are much less common.

Early Termination Opt-Outs

Opt-out clauses that refer to early termination of a lease are better known as buy-out clauses because the tenant usually has to pay a hefty fee to terminate the lease contract. In most cases, this fee is equivalent to two or three months of rent and forfeiture of any security deposits. The exact cost, however, depends on the rental value of the property regardless of how many months worth of rent the landlord or property includes in the clause.

Insurance Opt-Outs

Opt-out clauses related to insurance do not decline a landlord or property manager's offer of insurance coverage -- it is your responsibility, not your landlord or property manager's, to insure what you own and keep in the rental unit. Opt-out clauses in a rental agreement thus merely verify for the landlord or property manager that you are choosing not to insure what you have. The clauses usually reiterate the fact that the landlord or property manager is not liable for your property in cases where the property manager or landlord is not responsible for damage or loss to your belongings.

Advantages and Disadvantages

The major advantage of an early termination opt-out is that the tenant has greater flexibility, as he can move out of the rental unit before the lease ends if necessary. However, early termination opt-outs are costly, as you have to cover the buy-out fee plus the deposit, application fee and rent at your new home.

Insurance opt-outs can be beneficial to the tenant because you are not required to purchase insurance you do not feel you need -- that is, you ultimately decide whether your property is worth covering, having greater control over your budget. They also protect landlords and property managers from unnecessary lawsuits and reimbursements. However, if a tenant selects an opt-out clause related to insurance, she has to pay out of pocket if something happens beyond the property manger or landlord's control.