Liz Pulliam Weston

The Basics

How to get out of a deal

Need to shed your apartment or car lease or cell phone contract? Many times, it can be done -- but carefully.

By Liz Pulliam Weston
MSN Money

When you sign a contract, you're supposed to do your best to carry out your end of the deal.

Sometimes that's tough. Sometimes it's impossible.

Maybe you've lost your job and can't afford the car you'd leased. Maybe the apartment you've rented turns out to be infested with rats. Maybe you had no idea what you were getting into when you signed on the bottom line for your cell phone or some other service.

The good news is that no contract is written in stone. (If contracts were, every lawyer would have Conan the Barbarian biceps from carrying them around. Rim shot, please.)

But breaking a contract can have serious repercussions. Do it wrong, and you could face a lawsuit, wage garnishment and tarnished credit reports.

I'll show you ways to get out of three common contracts: an apartment lease, a car lease and a cell phone contract. But first, there are a few things you should know about trying to wriggle out of a deal. For example:

There's usually no "cooling off" period. For most deals and contracts, it's a myth that you're free to change your mind after a certain number of days. Exceptions:

  • You do have a chance to cancel contracts on certain sales made to you in your home (via a door-to-door salesperson, for example) or at a temporary place of business, such as a hotel ballroom or convention center. In those circumstances -- and there are exceptions even then -- the Federal Trade Commission's cooling-off rule gives you until the midnight of the third day after the sale to cancel the deal. For more, visit the FTC's site.
  • Some states have cancellation options that apply to certain sales. In California, for example, you can buy a two-day "contract cancellation option" for a fee ranging from $75 for a car priced under $5,000 to 1% of the price of a car worth $30,000 or more. If you return the car, the dealer can charge a "restocking" fee of up to $500. Florida offers renters a similar arrangement: If the landlord agrees, you can pay a fee equal to two months' rent for the right to break a lease.
  • Cell phone carriers usually give you 30 days to try their service before those wicked early-termination fees kick in.

In most cases, though, a deal's a deal. It's up to you to know what you're getting into and to read the fine print. Speaking of which:

The fine print may set you free. Most contract language is designed to tie you up and tie you down. But your service agreement or contract may also give you an out -- a way to cancel without serious repercussions. So read it all the way through. If there's something you don't understand, you can try asking the company or consulting an attorney. (Most areas have free or low-cost legal aid for people who can't afford attorneys; contact your county or state bar association for referrals.)

Don't overplay your hand. If you were tricked, manipulated or coerced into signing a contract, you may have legally valid grounds for not fulfilling your end of the bargain. If that's the case, talk to a lawyer.

Otherwise, be careful of using loaded legal jargon. Don't try to get out of your gym membership by accusing them of duress -- they didn't hold a gun to your head. They also didn't commit fraud by failing to tell you the locker room gets busy at lunchtime. Threatening people or businesses with legalese and lawsuits just puts them on the defensive and often makes solutions harder to find, rather than easier.

OK, on to some particulars.

How to break an apartment lease

There are plenty of reasons for wanting to leave a home or apartment you've leased. The following three reasons are generally considered "justifiable" reasons, meaning that you wouldn't be held liable for the remaining months on your lease:

  • Serious defects. In all states except Arkansas, a landlord is required to provide "fit and habitable" housing, said attorney Janet Portman, the managing editor of legal self-help publisher Nolo and author of "Every Tenant's Legal Guide." "Fit and habitable" typically means the housing has heat, lights, water, functional plumbing and a working kitchen, is waterproof and is free from vermin infestation (rodents, termites, bedbugs, roaches, etc.). In all of these states, you can break the lease if your home isn't habitable, you didn't cause the problem yourself and you gave the landlord a reasonable amount of time to fix the problems. (And fixed means fixed. You can move out if your apartment is overrun with cockroaches, for example, even if the landlord has sprayed for them repeatedly. "Even though the landlord is doing all he can, you don't have to live there," Portman said.)
  • Call to duty. If you're in the military, public health service or National Oceanic and Atmospheric Administration and are called to active duty elsewhere, your landlord must let you out of your lease. You can be charged for only 30 days of rent beyond your next rent payment.
  • Domestic violence. If you live in federally subsidized housing, you can break a lease if you're a victim of domestic violence. Twenty states have passed similar laws that apply to private landlords. You'll typically need to show proof, such as a protective order.

You'll want to research applicable laws and keep copies of any paperwork, such as the letters you sent to your landlord asking him to fix the repeatedly broken heater. You also may want to consult a tenants-rights organization for help.

Your landlord may threaten to sue you, although if your actions were justifiable, it's typically an empty threat, Portman said. What's more likely is that the landlord will keep your deposit. If the law's on your side, you can go to court to get your deposit back, Portman said.

If you have other reasons for wanting to break your lease, you face a tougher battle. Unless you can find a good, creditworthy tenant to take over your lease, and your landlord approves, you'll likely find yourself on the hook for at least some of the upcoming months' rent.

The good news: In about three-quarters of states, a landlord is required to make a reasonable effort to re-rent your apartment if you break a lease. If the landlord is successful, you can be charged only for the months the apartment was empty.

The bad news: If vacancy rates are high where you live, you may end up paying for many months.

How to get out of an auto lease

Speaking of uphill battles, worming your way out of an auto lease isn't going to be easy.

"The lease contract is one of the hardest to get out of," said Philip Reed, the senior consumer-advice editor of Edmunds.com. "There are options, (but they) aren't necessarily good."

Getting someone to take over your lease is one of the better choices. Two Web sites, LeaseTrader.com and Swapalease.com, have emerged in recent years to connect people who want to get out of leases with those who want short-term use of a car -- and to handle the transfer.

"They have the legal know-how (to get the contract) from one person to another," Reed said.

The finance company that offered the lease must approve the deal and may charge a fee for the lease transfer. The sites charge their own fees. Drivers eager to get rid of a car may have to add some kind of incentive to the deal, from cash payments to subsidizing the lease cost.

"Instead of paying $550 a month, you might say, 'I will subsidize $50 or $100 a month of the cost,'" Reed said.

Other options:

  • If you have the money or can swing a loan, you could consider negotiating to buy the car before the end of the lease and then sell it to recoup your costs. Depending on the car's value and your situation, that could make more financial sense than continuing the lease.
  • If you're ready and able to acquire another car of the same make, you could ask the dealership to help get you released from the lease in exchange for buying or leasing a vehicle there.
  • Again, if you have the money, you could simply make the rest of the payments you owe and turn the car in. This isn't much of a solution for those who are strapped financially, but it may be the easiest way to dump a car you dislike. You'll want to find out if there are any early-termination fees, however.
  • If your car has had numerous and well-documented problems, you might try for a buyback. You're in essence arguing that you were leased a defective car and, rather than sue the dealership, you're willing to let them take back the car, cancel the lease and call it a day.

Reed knew one man who was so disgusted with the problems he had with a BMW that he dropped it off for servicing and never went back. He told the dealership to get him out of the lease or he'd sue, Reed said. The dealership opted to take back the car.

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Most often, though, dealerships don't care if someone wants or needs to get out of a lease. Reed's own sister was suddenly widowed, and the dealership refused to take back the car her husband had leased.

"She had to pay off the rest of the lease," Reed said.

If you're really strapped and you can't find someone to take over your contract, it's time to talk to the company that holds your lease -- not the dealership.

"People make the mistake of going to the dealership. The dealership is not interested in helping you unless they get some money out of it," Reed said. "They really need to deal with their finance company."

You may be able to negotiate a settlement with the finance company where you pay a lump sum that's less than what you would otherwise owe. Settlements typically damage your credit, and there are no guarantees the finance company will play ball.

"It's a little bit of a case-by-case situation. Every finance company is different," Reed said.

Continued: How to get out of a cell phone contract

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