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28 Mar 2017

The myth of the ‘break lease fee’

We are regularly asked questions about ‘break lease fees’ - when an agent can charge one, how much it is, and where it can be found in the legislation.

Under the RTRA Act, there is no mention of a ‘break lease fee’ at all, let alone any suggestion of a particular amount.   An agent cannot charge a tenant a fee for re-letting a premises, but can of course charge the property owner (their client) a letting commission for providing that particular agency service.   Letting commissions were de-regulated in December 2014 so this could be any amount negotiated between the client and agent, and included on the signed Property Occupations Form 6.

However, where a tenant terminates an agreement before the end of their fixed term tenancy (in a way not permitted under the Act) a lessor can recover, from that tenant, the lessor’s reasonable costs incurred in reletting the premises. This is stated on every Queensland tenancy agreement in standard term 7. As one example of what the lessor’s reasonable costs of reletting may include: if the lessor has had to pay their managing agent a letting commission to find a new tenant, then this is generally considered to be recoverable from the tenant who terminated the agreement before its end.   

So the real story is that the agent is recovering the lessor’s actual costs from a tenant - not charging the tenant a ‘fee’.  If a tenant is leaving only a short time before the end of their fixed term tenancy, then consideration would be given to the fact that the owner would have incurred the agent’s full letting commission in the very near future in the normal course of things anyway. In that circumstance, it might not be considered reasonable to expect the tenant to reimburse the owner for the full letting commission.   If a property owner decides not to relet the property, then they won’t be charged a letting commission by their managing agent and therefore this won’t be a particular cost the lessor has actually ncurred. In some cases, lessors may incur other reasonable costs in reletting - such as advertising.

A lessor can incur other forms of loss as a result of a tenant breaching the agreement, and the Act does allow a claim for compensation as a result of a tenant’s breach. This could be pursued through mediation, and then an application to QCAT, and can be done either during the agreement, or after the agreement has ended. Sections 419, 420 and 421 of the RTRA Act are relevant when this applies.

 

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