Breaking a lease - Landlords bulletin 67
11 May 2023
Breaking a lease
Although a tenancy agreement is a binding contract, circumstances can change for tenants during the term of a fixed-term tenancy agreement, causing a need to break the lease.
A tenant breaking their lease can be experiencing a lot of stress, which can include a need to relocate at short notice for work or a change in financial circumstances.
This bulletin explains each party’s key responsibilities when breaking a lease.
The tenant should advise you of their intent to break lease as soon as they can and give an approximate, if not exact, date of when they want to vacate.
If you agree to break the lease, you can ask the tenant to cover costs you reasonably incur as a result of breaking the lease. The cost of advertising the premises for lease is a common example of a reasonable cost and tenants can be required to continue paying rent until a replacement tenant is found.
You should explain the likely costs to the tenant straight away. Providing an approximate figure and breakdown of the costs will help them with their planning.
As long as the tenant is paying rent, they’re allowed to live in the property as per the tenancy agreement.
As with any tenancy, the tenant is responsible for returning the property in a clean and undamaged state at the end, less normal wear and tear.
You might have a management agreement with a property manager, who has the authority to handle some of your responsibilities.
You’re responsible for mitigating any costs you might incur as a result of the tenant breaking lease. This includes advertising the property quickly to find a replacement tenant and minimise lost rent.
You can only ask for reasonable costs. In a tight rental market, you’re unlikely to experience much of a loss of income if a tenant breaks the lease. You may actually make a financial gain if you decide to advertise the property at a higher rent.
You’re still liable for the cost of any end-of-tenancy jobs, such as the final inspection. These costs can’t be passed on to the tenant.
You also need to allow the tenant a fair chance to attend the final inspection. This helps avoid drawn-out bond disputes.
Following the final inspection, the bond money must be returned to the tenant as normal, less the cost of any repairs or maintenance that they are responsible for.
Lessor breaking lease
As a lessor, you might also experience a significant change in circumstances causing you undue hardship if the tenancy continues.
The tenant might agree to end the tenancy early if you ask, and you can offer to pay costs such as relocation and connection charges at the tenant’s new property.
The tenant cannot be forced to leave but, if a tenant refuses to end the tenancy early, you can apply to the Magistrates Court for an order to end the tenancy.
The court may order the end of the tenancy if its continuation will cause undue hardship to you. You may experience undue hardship if you need to relocate to the rental property due to a change in your financial circumstances but cannot due to the tenancy. The court may order you to compensate the tenants for costs incurred as a result of the termination, such as relocation costs.
More information on going to the Magistrates Court for residential tenancy matters is available in our Renting out your property – a lessor’s guide.
If you are experiencing financial difficulties, the following websites may provide useful information:
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