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20 Feb 2017

Early Termination of a Tenancy Agreement - what it all means

With a tenancy agreement being legally binding, compensation must be paid if a fixed term agreement is ended by a landlord or a tenant before the end date under no valid grounds.

This is otherwise known as “Breaking a Lease”. Here are the answers to a few questions you might have about break leases.

What is involved in early termination of a tenancy agreement

A typical example is when a tenant chooses to end a fixed term tenancy before the end date. This is pretty common and is often due to various reasons – a decision to move in with a partner, job transfer, purchase of a property or just a simple change of plan.

Of course, as disappointing as it may seem, you really can’t make your tenants stay if they don’t want to. Nonetheless, it does not mean they can just get off the hook that easily. There are some financial obligations that they have to settle.

Tenant’s Obligations

There are 44 regulated standard terms in Queensland’s General Tenancy Agreement where standard term 7 indicates the tenant’s obligations prior to leaving the property before the end of a fixed term.

7 Costs apply to early ending of a fixed term agreement

[1] This clause applies if —

    [a] this agreement is a fixed term agreement; and

    [b] the tenant terminates it before the term ends in a way not permitted under the Act

[2] The tenant must pay the reasonable costs incurred by the lessor in reletting the premises.

On the other hand, such obligation will not be applicable if the tenant ends the agreement in a way the Act permits.

Should the rent still be paid by the early terminating tenant?

The tenant is still responsible to continue paying rent until the day before a new tenant moves in.

If the tenant refuses to pay for the landlord’s loss of rent, a compensation claim can be made through QCAT. There will be no final amount determined until a new tenancy has been secured. The compensation will consist of the amount of rent from when the ‘break lease’ tenant stopped paying through until the day a new tenancy starts.

Who pays for re-advertising?

Since the landlord would have to re-advertise the property in order to find a new tenant, it is the obligation of the ‘break lease’ tenant to cover the advertising costs. If the tenant refuses to compensate the landlord, the latter can make a claim through QCAT for compensation (Section 421 [1] (b) of the RTRA Act). The landlord must present evidence of the advertising costs incurred.

Who pays the agent’s letting commission?

Regardless if it’s an early termination or if the tenancy is really due to end, the landlord is expected to pay the agent their letting commission. However, if the reason for re-letting is because the tenant chose to vacate the property prior to the end of the agreement, it can reasonably be expected that the tenant will reimburse the letting commission charged by the agent.

The agency appointment or the Property Occupations Form 6 states the amount in question. It depends on how much the landlord has agreed to pay the agent. The letting commission is basically 110% of one week’s rent, including GST.

Other re-letting costs the tenant is expected to pay

  • Re-cleaning and re-testing of the smoke alarm to prepare for the new tenancy. Here is an example of a QCAT decision to let the tenant reimburse the landlord for a smoke alarm clean/test.

 

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