How to Break a Rental Lease Early
Breaking your lease early can be an intimidating experience. Fortunately, we’ve put together this comprehensive guide to help Australian tenants better navigate the difficult process.
by The Neat Team
Whatever circumstance you find yourself in, breaking your lease early can be an intimidating experience. Whether if its financial difficulties, an unexpected relocation, or extenuating circumstances, there are plenty of unanswered questions you might have about the process.
Fortunately, we’ve put together this comprehensive guide to help Australian tenants who find themselves in this difficult situation. We’re covering everything from the rules and regulations in Victoria and New South Wales, resources on how to terminate your lease, and recommendations on how to avoid any penalties and fees.
How to break a lease
Once you’ve decided to break a lease, you’ll need to determine if your tenancy agreement is under a rolling lease or a fixed-term contract. This will help determine whether you’re breaking a lease early or not.
Review your tenancy agreement
A rolling lease agreement (also known as a periodic lease in Victoria) means you can terminate your lease at any time without incurring fees. However, you must give your landlord the required amount of notice, usually 14 days.
Alternatively, a fixed-term lease means you have previously committed to staying in the property for a set amount of time. If you want to move out before the end of the specified term, you’ll literally be “breaking your lease” and in most circumstances fees and penalties will apply.
Submit a termination notice
Regardless of the type of agreement you have with your landlord, it’s best to give as much notice as possible. Officially this will be in the form of a written termination notice, which can be delivered by email, post or in person. The termination notice can be given at any time and does not need to align with your rent payment cycle.
The signed and dated termination notice must include:
- The rental property’s address
- The date you wish to vacate
- The reason you’re ending the tenancy
What are the penalties for breaking a lease early?
Fees for breaking a lease in NSW
As of 23 March 2020, new reforms were introduced to the NSW Residential Tenancies Act with amendments with how break-fees are calculated. Depending on when your tenancy agreement was signed, the break-fees will be applied as follows.
Signed from 23 March 2020
- Four weeks rent: If less than 25 per cent of the agreement has expired.
- Three weeks rent: If 25 per cent or more but less than 50 per cent of the agreement has expired.
- Two weeks rent: If 50 per cent of more but less than 75 per cent of the agreement has expired.
- One weeks rent: If 75 per cent or more of the agreement has expired.
Signed prior to 23 March 2020
For fixed-term leases of three years or less, under the Additional Terms in your tenancy agreement, you’ll find the break fee you’ll need to pay to your landlord, either one of the following:
- Six weeks rent: If the tenant leaves in the first half of the fixed-term agreement.
- Four weeks rent: If the tenant leaves in the second half of the fixed-term agreement.
If no break-fee is included in the agreement, the landlord or agent may negotiate an agreed amount of compensation with the tenant. If an agreement can not be made, the landlord may still seek compensation by applying to the the NSW Civil and Administrative Tribunal (NCAT).
Fees for breaking a lease in Victoria
In Victoria, there are no direct fees related to breaking a lease, however landlords can seek compensation for financial loss by applying to the Victorian Civil and Administrative Tribunal (VCAT). More specifically, these can include loss of rent and reletting fees.
Loss of Rent
- Short-term lease: If you break a short-term lease, you may have to pay rent until the lease ends or until a new tenant moves in.
- Long-term lease: If you break a long-term lease, the landlord is entitled to ask for one month’s rent for every full year remaining on the lease. However, this is capped at six years, so the most a landlord can ask for is six months’ rent.
Reletting and advertising fees
In some circumstances, landlords may request compensation to place the property back on the rental market.
What is a re-letting fee?
Reletting and advertising costs are usually calculated on a pro-rata basis, so you only have to cover the fees for the lease’s remaining term. For example, if you decide to vacate nine months into a 12-month fixed-term lease, you only have to pay 25% of the reletting and advertising fees. It’s within your rights to ask for a copy of this invoice.
It’s also worth noting that reletting fees do not apply to private leases in Victoria, because there are no agency fees.
Repercussions on future rental prospects
Unfortunately, breaking a lease can have repercussions on your future rental prospects. In addition to the associated penalties and fees, tenants who owe their landlord more than the bond amount may be placed on a “national rental blacklist“. As all property managers have access to this national database, leaving any fees unpaid is an unnecessary risk towards gaining access to any future rental market.
Lastly, a tenant is still be responsible for the state of the property upon vacating the premises. For this reason, forfeiting a rental bond may not be a sufficient alternative to covering the fees associated with breaking a lease.
How can you break a lease without penalty?
In some extenuating circumstances, you may need to break your lease through no fault of your own. In situations like these and on a case-by-case basis, a tribunal may waive the associated penalties and fees.
Through mutual agreement
If you’re on good terms with your landlord or real-estate agent, having a frank conversation about your circumstances may help them better understand your situation. This can potentially lead to a mutual agreement about how to move forward, leading to a more favourable outcome for both parties.
For example, instead of breaking your lease, your landlord may consider transferring a lease to another tenant. Just be sure to get consent and any agreements signed by the agent, landlord, and yourself.
Breach of tenancy agreement by your landlord
In some instances, the landlord may have failed to meet their obligations under the the tenancy agreement signed by both parties. Some examples include:
- The rental premise becomes uninhabitable, through neglect or disrepair.
- The landlord does not provide ‘reasonable peace, comfort and privacy.
- The landlord did not inform you of their intent to sell the property, before entering into the tenancy agreement.
- The landlord requests to increase rent more frequently than is permitted, once in a 12-month period. A landlord must also give the tenant at least 60 days written notice.
- The landlord failed to disclose that the property was listed on the Loose-filled Asbestos Insulation (LFAI) Register.
Due to extraordinary grounds and hardship
In both Victoria and NSW, the respective tribunals recognise that some situations call for a more empathetic approach to making decisions surrounding “extraordinary grounds and hardship”. For example, the tribunal will consider the following:
- You’ve been offered alternative accommodation in social housing.
- You’ve been offered alternative accomodation in an aged care facility.
- Extenuating circumstances, including situations involving:
- Domestic violence
- Economic hardship
- Death of a co-tenant.
If you’re unable to come to a mutually-beneficial agreement through negotiation, or you believe your landlord is asking for an unreasonable amount of compensation, you can contact your state’s tenancy tribunal to lodge a claim.
In each of these scenarios it’s important to stay up-to-date with your rights as a tenant. Both the Tenant’s Union of NSW or Tenants Victoria promote and protect the rights of tenants, providing invaluable resources for breaking a lease early.