What happens when my tenant wants to break their lease early?

Break Lease

If you own an investment property, your expectation is for a tenant to stay there for the agreed period of time.

In some cases, tenants may choose to end their fixed term tenancy early due to legal or personal reasons, so what do you do if that happens?

For the tenant, they must, by law, produce a written termination notice that includes: the address of the premises, the day they plan to vacate, and a reason. This must be delivered to you or your agent in person, by post, or by email. Following this, they must vacate – move out and return the keys – as per the notice.

The amount of notice period will usually be different depending on the situation, but as a general guide, a tenant should give as much notice as possible.  However, there may be costs involved when a tenancy is broken early.  A tenant may have to continue paying the rent until the fixed period ends or a new tenant moves in.

They may have to cover a portion of the advertising costs and an agent’s reletting fee if you use a property manager. Once a tenant has given notice, your next step is to find a replacement tenant. As a landlord, you will have the responsibility of not making it harder to find a new tenant, such as increasing the rent, or unreasonably knocking back potential tenants.

Once a new renter has been confirmed, a tenant will need to pay any amount owing and if they refuse, this money will be taken from the bond. It is important to note that you may have to refund a tenant a pro-rata amount if the rent has been overpaid by the time a new tenant has moved in.

Another cost incurred by a tenant is a break fee if you have one in your tenancy agreement. This is an amount equal to six weeks rent if the tenant leaves during the first half the fixed term, or four weeks rent if they move out in the second half of the fixed term. There are some circumstances where a fixed term agreement may be terminated without penalty. These include a breach by a landlord, an offer of social housing, a move into an aged care facility or nursing home, and hardship.

If your tenant needs to terminate their lease, you should always contact your local property manager as they will be able to manage the process for you.

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