Risks to consider when breaking your lease

Whether you are the owner of a rental property or the resident of a rental property, circumstances can arise where a fixed term tenancy needs to be terminated prior to the end date. This process is known commonly as a ‘break of lease’ or ‘early termination’.

Reasons for a tenant requesting early termination can be quite varied; perhaps a decision to move in with a partner, a job transfer, purchase of a property, needing more space, or just a simple change of plan.

However, a Tenancy Agreement is a legally binding contract between the tenant and Property Owner. Should the tenant decide to end the Agreement, they will be responsible for compensating the Property Owner for any loss or expense with relation to re-letting the property. Costs will generally include the payment of rent until a new tenant is found (or the Agreement end date, whichever comes first), any re-letting fees (typically 1 x weeks rent + GST), and all advertising costs incurred for sourcing a tenant.

A tenant is responsible for paying rent until the day before a new tenant moves in or up until the Agreement end date

The Property Owner also has a legal obligation to minimise costs that result from the early termination and must make every effort to re-let the premises in a reasonable time frame.

If the tenant refuses to compensate for the loss of rent, a compensation claim can be made through the Queensland Civil and Administrative Tribunal (QCAT) by the Property Manager on behalf of the Property Owner.

If there is a dispute between the tenant and the Property Owner about the amount of compensation, an attempt to mediate the issue must first be made with the Residential Tenancies Authorities (RTA) via a Form 16 Dispute Resolution Request. If the issue cannot be resolved through mediation, the matter can then be taken to QCAT for a decision/order.

In the case of excessive hardship, a tenant can bypass the RTA and make an urgent application directly to QCAT to end the Agreement. Legislation does not define “excessive hardship”, as this is dependent on individual circumstances and must be ruled on by an adjudicator at QCAT.

Some examples of excessive hardship for the tenant may include the loss of a job and being unable to pay rent, being required to relocate to another location for work, or severe physical or mental illness.

If a Property Owner wishes to end a fixed term Agreement on the grounds of excessive hardship (eg. lost job and unable to pay mortgage), they may also apply to QCAT for an order to terminate on the grounds of hardship. It is recommended that Property Managers discuss with the Property Owner prior to lodgement and attempt to negotiate with the tenant regarding possibly ending the Agreement early mutually.

A Tenancy Agreement is a legally binding contract, and as with anything to do with legislation, it is not always straightforward.

A tenant cannot be made to vacate the property during a fixed term Agreement without an order from QCAT (e.g. excessive hardship). However, should the tenant agree to the with the request, they may be entitled to negotiate a compensation payment (e.g. contribution towards relocation costs). Any Agreement should be put in writing per section 44 of the RTRA Act.

If you have any questions or concerns around this issue, our experienced team at Mosaic Property Management would be more than happy to help answer your questions.