What a landlord needs to know if a tenant wants to break the lease early

What a landlord needs to know if a tenant wants to break the lease early

June 26, 2017 | by Kenny Leung

You have signed a fixed term tenancy agreement with your tenants, but they now want to leave before the end of the fixed term. What can be done? Don’t worry, there are simple steps to follow that can protect your property and your investment.

What happens if your tenant wants to leave early?

People’s circumstances change all the time, and so tenants do have the right to move out of your property before the end of the lease (fixed term tenancy agreement) if they need to.

They must understand however, that on signing the lease they committed to stay for the full term. Under NSW law, breaking a tenancy agreement during the fixed term could mean they are liable to pay:

  • rent until a new tenant is found or the fixed term period ends, whichever occurs first.

  • a percentage of the advertising costs and the agent’s reletting fee, if you use an agent or property management company.

How can you deal with the situation?

The most practical thing to do is communicate with your tenant, while finding a replacement tenant as soon as possible. The existing tenant should allow property viewings to potential new tenants without hindrance. And. once you find a new tenant, you can request the departing tenants settle the amount they owe you. If they contest the amount, or if they don’t pay, you can claim it from the bond or apply to the NSW Civil and Administrative Tribunal. If the bond is insufficient to pay the debt, the tenant’s name could be listed on a tenancy database, making it extremely difficult for them to rent again anywhere in Australia.

What can you do to protect yourself?

You can agree with the tenant to include a fixed break fee clause in your tenancy agreement.

If the fixed term is for 3 years or less the break fee is:

  • 6 weeks rent if they move out in the first half of the fixed term.

  • 4 weeks rent if they move out in the second half.

If the fixed term is longer than 3 years you can agree on the amount to pay between you.

Can a tenant break a lease early without penalty?

Yes, under special circumstances. For example:

  • you offer the property for sale and you didn’t tell the tenant before signing the lease that the property would be sold.

  • the tenant moves into an aged care facility or nursing home (not a retirement village).

  • the co-tenant passes away.

DiJones Real Estate, together with their directors, officers, employees and agents have used their best endeavours to ensure the information passed on in this document is accurate. However, you must make your own enquiries in relation to the information contained in this document and seek advice from your financial advisor, broker or accountant to ascertain its application to your circumstances.
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