17 April 2012

Breaking a lease in Canberra? Advice please

17 April 2012 | miss2

In need of some advice please.

My husband and I need to break the lease on our rental property, we still have 4 months left of the fixed term. We are having to break lease due to a loss of income and my husband has moved away from Canberra for work and we cannot afford 2 rents.

I am trying to make sure I have everything correct and in order before I do give notice because we have had some previous issues with the agent/ landlord and I want to make this as easy a process as possible.

I have read over the tenancy act and have a general idea of what to do BUT I cannot find any information on how many weeks’ notice I have to give for breaking a fixed term lease before it is over.

I understand that I will have to pay until a new tenant is found and that I will have to pay readvertising costs.

I have found this but from what I can tell it is regarding leaving at the end of your lease or after

TERMINATING A FIXED TERM TENANCY

At the end of the fixed term If a tenant wishes to end the tenancy at or after the end of the fixed term, they are able to do so by giving 3 weeks’ notice in writing.

I cannot see how much notice I need to give if we are breaking with time on our lease still to go.

Ideally i need to break as soon as possible for finance reasons but I will continue to pay what I have to and any other costs until we are no longer under contract.

If anyone can offer any advice that would be appreciated.

Thank you

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Darkfalz3:28 pm 18 Apr 12

zorro29 said :

doesn’t change the fact that the fee is not legal…the only costs to be reimbursed are those reasonably incurred by the lease breaking – namely the cost of readvertising and any lost rent between the time the current tenant moves out and the new one moves in…

I thought this total cost is what they were referring to as the “fee”. I don’t think the REA has the right to charge separately for their time/inconvenience, only the cost to the landlord on whose behalf they are acting. But I could be wrong.

zorro293:15 pm 18 Apr 12

Darkfalz said :

zorro29 said :

that’s exactly what i was talking about…they will persist with that “break lease fee” but it’s illegal. don’t sign that document as is and demand it be taken out…kindly reminding the agent that such a fee is illegal

also request evidence for any advertising expenditure, which, as noted, shouldnt exceed 1 week rent in $$ amount

If it takes them 6 weeks reasonably to re-lease the place, they can charge her all 6 weeks. Usually it wouldn’t take that long, you could probably fight it with ACAT.

If your landlord is a decent person they’ll probably just charge you whatever to cover their losses and try to get it re-tenanted ASAP – as on the flip side, it’s probably an opportunity for them to increase the rent again without the 1 year minimum wait.

yes…i didn’t actually say they couldn’t do that, hence why i mentioned earlier that in canberra you’re usually lucky and the place will re-rent quickly and usually for more $$

doesn’t change the fact that the fee is not legal…the only costs to be reimbursed are those reasonably incurred by the lease breaking – namely the cost of readvertising and any lost rent between the time the current tenant moves out and the new one moves in…

Darkfalz2:56 pm 18 Apr 12

zorro29 said :

that’s exactly what i was talking about…they will persist with that “break lease fee” but it’s illegal. don’t sign that document as is and demand it be taken out…kindly reminding the agent that such a fee is illegal

also request evidence for any advertising expenditure, which, as noted, shouldnt exceed 1 week rent in $$ amount

If it takes them 6 weeks reasonably to re-lease the place, they can charge her all 6 weeks. Usually it wouldn’t take that long, you could probably fight it with ACAT.

If your landlord is a decent person they’ll probably just charge you whatever to cover their losses and try to get it re-tenanted ASAP – as on the flip side, it’s probably an opportunity for them to increase the rent again without the 1 year minimum wait.

zorro292:04 pm 18 Apr 12

that’s exactly what i was talking about…they will persist with that “break lease fee” but it’s illegal. don’t sign that document as is and demand it be taken out…kindly reminding the agent that such a fee is illegal

also request evidence for any advertising expenditure, which, as noted, shouldnt exceed 1 week rent in $$ amount

miss21:59 pm 18 Apr 12

Thank you everyone.
To be honest I haven’t rung the real estate yet and discussed as we have had some issues with the PM and I wanted to make sure I knew my rights first.
I also wanted to clean out the whole house bar essentials and have it cleaned etc. before I gave notice, that way that could not come round and say
“ we can’t show this house to people, there’s dust,” or something like that.

Now, one thing that I have read in the tenancy act is this –

The RTA does not provide for a “break lease fee” or penalty. Many landlords and agents try to get a full week’s rent as a ‘break lease fee’ irrespective of their genuine advertising costs.

Under RTA Section 84 the landlord is entitled to compensation for:
The loss of the rent that they would otherwise have received had the tenancy continued to the end of its fixed term; and The reasonable costs involved in reletting the premises (e.g. advertising, reimbursement of legitimate agent’s costs)

But in the break lease form that I have from my agent it says this –

I understand as per clause 62 Abandonment during a fixed term of the Residential Tenancy Act 1997, that I am required to pay compensation for costs incurred to the Lessor equivalent to one weeks rent $_______________________________________

I understand as per Clause 62 (1)(a) Abandonment during a fixed term of the Residential Tenancy Act 1997, that I am responsible for compensation for the loss of rent and care of the premises until another Tenant takes over and also compensation for the reasonable costs of advertising the premises for the lease until the premises is re-let.

I agree/ disagree to have the property advertised on allhomes.com.au website at the cost of $89.00.

I agree/ disagree to advertising the property in the Saturday Edition of the Canberra Times at the cost of corporate rates. I understand the invoice will be sent to me once a new tenant has been secured.

I understand that the agency will start to act immediately, on my instructions after receiving the full amount of the owed lease breach fee & advertising costs.

LEASE BREACH FEE x
Allhomes.com.au $89.00
Total x

So in that they say that I need to pay a lease breach fee but the way I read it in the ACT was that I do not.
It also sounds like they are claiming the Canberra times advertising fee as well as the all homes fee ( which is fine, I was aware of having to pay for advertising)

From my muddled understanding, I have gathered my final costs to the agent should be as followed –
Any advertising costs exceeding no more than 1 weeks rent.
Compensation in rent until a new tenant has been found ( weekly rent)

Where are the pulling this lease breach fee from especially considering that the total they have told me to pay already exceeds 1 weeks rent in advertising and that is not including that Canberra times bill yet!?!!

Sorry if this post is a bit garbled, I know what I’m trying to say in my head lol

Darkfalz1:30 pm 18 Apr 12

If you break the lease early the landlord is entitled to charge you for lost rent revenue for any period while the place is un-tenanted after you leave, plus the cost of advertising to fill the place.

VYBerlinaV8_is_back1:18 pm 18 Apr 12

As a landlord, I’ve dealt with this situation on more than one occasion. What I’ve organised is generally to provide a reasonable amount of notice (e.g. 4-6 weeks), and negotiate for the tenant to tidy the place up so other prospective tenants can be shown through. We sign up the new tenant, old tenant vacates on nominated date and everyone gets on with life.

If your property manager is reasonable to deal with, perhaps call and talk through the options. If your property manager is a PITA, work out your legal position first.

zorro2912:27 pm 18 Apr 12

all the above is true, but in canberra if you can get someone to move in in your place then you won’t need to re-advertise

they will try and charge you a fee even if someone moves in the day you move out – be careful about that, it’s not legal – agents must not accept money for moving in or moving out

i dont think you will need to wait long, rental places in canberra tend to fill fast and usually they will be keen to re-rent and boost the price up again

discuss with your agent, but dont let them charge you for more than they should

when in doubt, like mentioned above, tenants union is excellent in ACT

still_strange10:50 am 18 Apr 12

Gershwin said :

Tenants Union ACT has lots of great info:

http://www.tenantsact.org.au/rentingAdvice/tenancy-factsheets/Ending-a-Tenancy-and-Breaking-a-Lease

My read of it is that you can pick your own date, but the sooner the better so that the costs to the owner are minimised – that’s in your interest as well as you can be accountable for reasonable costs incurred in re-letting the premises.

Agree. You can pick your own date. But, normal practice for agents is to start advertising 2-3 weeks before they want someone new in the property, so it is in your interests to give at least 3 weeks notice.

I broke my lease a few months ago and it went very well, ended up with a reference from them and no problems with my next rental application. My experience was:

I gave 5 weeks notice, because I knew the agent would probably take a bit of time to get around to organising things (and it turned out that was a convenient time for me as well).

I sent them a slightly changed version of the form letter from the tenants union webpage, attached to an email in which I apologised for the inconvenience and explained the situation I was in from a slightly more personal perspective than the letter allowed. They didn’t respond so I called a week later to ensure things were moving forward.

I made myself available whenever they wanted to show the place (ended up just being twice). They sent someone, but I also stood around and answered questions etc.

I didn’t quibble on the ‘reletting fee’ of one weeks rent (but my rent was pretty cheap in the first place so they weren’t taking much) I didn’t think it was worth arguing about any difference between actual costs and what they charged.

Good luck!

Bluenomi3:31 pm 17 Apr 12

The tenant’s union are great if you have any questions.

Don’t believe anything the real estate agest tells you without double checking with the union. We discovered the agent was attempting to rip us and the landlord off when we broke lease. The owner decided not readvertise the property so he could so some renos to the place before selling so was happy for us to stop paying rent when we moved out. The real estate agent told us they couldn’t get another tenant so wanted us to keep paying but didn’t tell the owner that. We did some digging, discovered they hadn’t advertised so were off the hook for rent.

beejay7611:03 am 17 Apr 12

From the Tenant’s Union (www.tenantsact.org.au):

Terminating a Fixed Term Tenancy Without Grounds (Breaking the Lease)

Terminating the tenancy agreement before the end of the fixed term without any of the grounds listed above will be a breach of the lease agreement. There are no penalties for this but the landlord may be entitled to limited compensation.

Notice

If you know you need to end the tenancy early, you should start by giving written notice to the landlord or agent of your intention to vacate on a specified date. Once you have served this notice, providing you vacate and return the keys on or by the date you propose, your tenancy terminates on this date (cl 84). This brings to an end your ongoing liability to pay rent and care for the premises, however you may still be liable for compensation, as follows.

Compensation

Where a tenant terminates a fixed term early, the landlord is entitled to compensation for losses incurred as a result of the early termination. What the law seeks to do here is to ensure that the landlord doesn’t suffer financial loss as a result of the early termination, but not to allow the landlord to profit from the situation. In other words, the object of the compensation is to put the landlord in the same position as he or she would have been in had the tenant not terminated the lease early.

The RTA does not provide for a “break lease fee” or penalty. Many landlords and agents try to get a full week’s rent as a ‘break lease fee’ irrespective of their genuine reletting and advertising costs.

Under RTA Section 84 the landlord is entitled to compensation for:

The loss of the rent that they would otherwise have received had the tenancy continued to the end of its fixed term; and
The reasonable costs involved in reletting the premises (e.g. advertising, reimbursement of legitimate agent’s costs).

Note, however, that the landlord’s ability to recover compensation is limited in several ways.

First, the amount ACAT may award for loss of rent is limited to 25 weeks rent, or until the agreement was to end anyway, whichever is less.

Second, the amount relating to reletting costs is limited to the genuine cost and capped at a maximum of one week’s rent. This is the absolute limit, there is no option to add on GST or advertising costs. Also, if the cost is less than one weeks’ rent then that is all they are entitled to. You can ask for an itemised bill detailing the costs.

Thirdly, since the landlord would incur reletting and advertising costs at the end of the fixed term tenancy anyway, there is a good argument that compensation for those costs should be calculated on a pro-rata basis, because they are not new costs but costs brought forward. Section 84(4) requires the Tribunal to consider when the tenancy would have ended and the landlord would have incurred advertising costs.

Finally, RTA s 38 provides that any party to a tenancy agreement seeking compensation has a general duty to mitigate (reduce or avoid) their losses. According to this rule, a person cannot recover compensation for a loss which could have been reasonably avoided.

This means that the landlord has to ensure that reasonable steps are taken to find and accept a new tenant. Failure to do so may mean that the landlord is barred from recovering compensation for all or part of the loss from the tenant.

Examples to watch for are a landlord failing to advertise the premises quickly and effectively or refusing reasonable applications.

Advertising at a higher rent may be a failure to mitigate depending on the circumstances. Where the higher rent is unrealistic and acts as a deterrent to prospective renters, then arguably it would be a failure to mitigate. However, the closer to the end of a 12 month fixed term tenancy an agreement is broken, the less likely a reasonable increase is likely to be a failure to mitigate, because the landlord is entitled to increase the rent every 12 months.

Keep a copy of any comparable premises being advertised at the same time in the same suburb (listings such as on http://www.ALLHOMES.com.au).
Reducing loss from breaking the lease

If an early termination is unavoidable, you can take some steps to reduce your potential liability, by:

Giving the landlord/agent as much notice as possible of the proposed date of vacation, so that efforts can be made to find new tenants;
Cooperating with the landlord/agent in the reletting of the premises by making yourself available to show people through the property;
Keeping the premises tidy so that they are attractive to prospective tenants;
Introducing prospective tenants to the landlord /agent.

Cooperation can work: you are able to end the tenancy agreement, and the landlord suffers little or no disruption to their rental income.

Things, however, may not always turn out for the best. To protect your interests, tenants are well advised to keep several precautions in mind:

Check whether the landlord is making genuine efforts to relet the premises. Have they advertised and how? Are they offering it to prospective tenants? Are they listing it for a realistic rent? Keep a record of any interest shown in the property that you are aware of.
Are reasonable offers being considered? Have prospective tenants been discouraged or refused on unacceptable grounds, e.g. unlawful discrimination, requests for higher rent, etc?
Once you have vacated the premises, it is generally unwise to pay any further money to the landlord/agent, except in final settlement of the problem. In other words, once you move out, and the tenancy has terminated, stop paying rent up-front. Payment without a guarantee that this is an end to the matter may result in money being spent but the premises remaining empty, at the tenants’ cost. Once the rental income stops, the landlord’s mind usually becomes very focused on finding a new tenant. This doesn’t mean you don’t accept your liability but that you will compensate for actual losses once they are incurred, rather than anticipated losses.
Check the property to see if a new tenant has moved in and whether the premises are still on the market. It isn’t unknown for a landlord to take the opportunity to do renovations, effectively taking the property off the market. If this occurs the tenant should be relieved of liability (due to the duty to mitigate).

If you are having difficulties in your fixed-term tenancy or are not sure how to end it, the safest option may be to apply to ACAT. If you are considering this option, seek advice from TAS.
And Finally

Try to negotiate to find a mutually agreeable solution to the problem.

NEVER abandon the premises, by leaving without giving written notice. This may increase your liability.

Vacate the premises in good order, ensuring that they are clean and that the keys have been returned (preferably with a receipt).

Also read our Tenancy Factsheets: Access and Privacy, and Bond.

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