This time of the year normally brings a higher rate of tenants needing to end their leases early, with reasons varying from relationship break-ups to financial hardship to work transfers.
Commonly referred to as ‘Break Lease’, the legislation provides for tenants to be allowed to end their lease agreements early, and outlines responsibilities on both sides.
RTRA ACT 2008 Section 362 – Duty to mitigate loss or expense – (3) The Lessor or Tenant- (a) must take all reasonable steps to mitigate the loss or expense; and (b) is not entitled to receive compensation for any loss or expense that could have been avoided by taking the steps.
Ending a lease early is regarded as a ‘breach’ of the agreement, and as such the tenants are required to compensate the owner for loss of rent until the end of the lease or a new tenant is placed, whichever is sooner. It is common for the tenants to continue their regular rent payments after they move out to help their budgeting, but this is not enforceable. The tenants are also required to compensate the owner for all ‘reasonable’ costs incurred for finding a new tenant, for example the letting fee and advertising costs.
The owner and agent must use reasonable efforts to re-let the premises quickly, including keeping the rent at fair market value and being reasonable in approving a replacement tenant. If the tenant believes that the owner/agent is not making enough effort to find a replacement tenant, they may have grounds to apply to QCAT Queensland Civil and Administrative Tribunal) for an early termination of lease.
Recovery of Moneys
Once a replacement tenant is found, the owner can seek recovery of monetary compensation from the tenant, normally from the bond money. If there is a dispute about the amount of compensation, the parties must attempt conciliation through the RTA (Residential Tenancies Authority). If the matter cannot be resolved through this process, it then progresses through to QCAT for a decision.
Termination with Grounds
A tenant with grounds to terminate (for example excessive hardship), can apply directly to QCAT for a termination order. If QCAT makes a termination order, the tenant will not be in breach of the tenancy agreement and no further compensation will be payable to the owner from the date of termination.
It is important for owners to understand that while the legislation provides for tenants to compensate them for breaking their lease, in practical terms this can become complicated, especially when there is financial hardship or domestic violence involved. Our goal as your agent is to make every effort to find replacement tenants to minimise your losses. Often this may involve reducing the rent slightly to attract more interest. The reduction in rent income will be added to your claim from the outgoing tenants and will add credibility to our efforts to mitigate the tenants’ loss if the matter proceeds to QCAT.
When a tenant wishes to break their lease, our goal is to educate all parties in the legislation and manage expectations on both sides. Once we find replacement tenants, we will seek compensation from the previous tenants which will not always go in the owner’s favour. This is another reason why you should ensure your landlord protection insurance is up to date and will cover you for a potential loss of rental income in such a situation.
For more information visit https://www.rta.qld.gov.au/