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The Ins and Outs of Breaking Lease

The Ins and Outs of Breaking Lease

The Ins and Outs of Breaking Lease

Sometimes circumstances change as the tenant or the landlord of a residential property and breaking lease is the only option. But breaking a residential lease in Victoria is a topic few know much about. So here is an explanation for both tenants and landlords for breaking a lease and how to go about it the right way to ensure all parties win.

For Tenants:

As a tenant, you may have a change in family circumstances, an interstate job opportunity or a number of other reasons to break lease. It’s important to keep in mind that breaking a lease can put the landlord in a tough situation so it’s best to be as flexible and accommodating as possible to ensure you get a good reference in the future.

Although you can’t be charged a penalty for breaking lease, breaking a lease causes the landlord financial loss in the form of advertising and leasing costs. These fees can be charged to you as the tenant. Fees you can be charged are:

The letting fee charged to the landlord pro-rata

For example; if you are 6 months in to a 12 month lease when you break the lease, you have to pay 50% of the fee charged to the landlord for letting the property.

Advertising costs incurred by the landlord in full

This can include photography, internet advertising costs and for lease boards.

Rent until the day before a new tenant moves in

You must continue to pay rent until a new tenant takes possession. Taking possession is when the keys are physically handed to the new tenant and a new lease begins.

It’s important to allow the agency or landlord to run open for inspections and private inspections so that they can get a new tenant and keep your cost to a minimum. It’s also important to keep the house clean and tidy and the gardens well presented to increase the chances of potential tenants applying for the property.

To keep your rental history intact you should continue to pay rent on the due date (if you overpay rent it will be refunded once the keys are handed back) and keep open communication with the agent or landlord. A lease break is not a negative if all runs smoothly and all parties co-operate.

For Landlords:

Sometimes your circumstances may change and you may need to move in to your property even if there is a lease in place. This process is quite difficult should the tenant not agree, so it’s best to be facilitating, open and friendly towards the tenants during this process.

The recommendation here is to offer the tenants compensation to encourage them to accept ending the lease early. This can be in the form of paying for moving costs, giving free rent or offering a general compensation figure.

This should be treated as a negotiation and you should be prepared to make a generous offer as many tenants will be unwilling to uproot themselves.

Should negotiations be unsuccessful and you can’t come to an agreement there is one other path you can follow to resolve the issue. You may apply to the Victorian Civil and Administrative Tribunal for a “reduction in a fixed term tenancy agreement”. This is covered by section 234 of the Residential Tenancies Act 1997.

In this application and VCAT hearing, you have to prove that your financial or other circumstances outweigh that of the tenants should they be required to vacate.

In most cases it is unlikely that your circumstances will outweigh that of the tenant. You must provide financial proof and proof of the underlying circumstances that require you to take possession of the property back.

Ultimately if will be the decision of the VCAT member so it’s best to try and negotiate with the tenant before resorting to VCAT.

If you want to discuss a lease break and get some advice on your specific situation, please feel free to contact Savoy Real Estate at [email protected] or 1300 328 848.

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