Breaking lease...should I stick to the rules?

[jerrybee]

My tenant in Melbourne signed up 18 months ago when the rental prices were very high. Rent prices have dropped considerably since then. I'm under no illusion about what I could get in the market today.

They now want to break out of the contract 6 months ahead of time. Technically I have the right to have them pay full rent until we find a new tenant (and they too understand and accept the rules), however it's going to be impossible to find a new tenant for that rate. I am perfectly willing to accept a tenant for a lower rate but at the same time I could be a real a$$ and have them continue to pay me until I find a new tenant that is willing to pay the same rate (which of course will never happen).

What do you think I should do? Stick to the rules I'm entitled to, or cut them some slack?

On the one hand, I feel like a complete tosser because they seem like nice people and are willing to pay until we find someone to take over their lease. Nothing impresses me more than when people accept responsibility, so I feel some leeway is deserved. On the other hand...they DID sign a contract. I could be the nice guy but I would stand to take a sizable hit. What would you do?

 

[alexlee]

Let them accept the full responsibility of their agreement.

And be impressed.

 

[jerrybee]

And be impressed.

lol yeah, I'm thinking I need to be cold and calculated about this. I have mortgage repayments to make too!

But I really do appreciate having people take responsibility. I try to do that myself in all parts of my life. Good not to have scumbag tenants. I wish they could stick around

 

[depreciator]

Do they want to break the lease just because they know they can rent someone else more cheaply?

 

[Sez]

Remember that you do have a responsibility to mitigate the tenants loss when they break their lease. If they went to VCAT once the property hadn't been let for 3 months at the high rent they are paying the first thing VCAT would ask is why you hadn't reduced the rent and they'd be cut loose.

I'd reduce the rent to what you think it will get in this market and have the current tenants continue to pay at their rental rate until a new tenant is found. This way you have done everything in your power to mitigate the loss for both parties (if VCAT cuts them loose you may have to pay them back!). Just put it to the tenants that you're doing everything you can to find a tenant sooner rather than later. .

 

[wylie]

What is the rent, and what is it likely you would get now?

If there is a drop of $50 per week, and you have to accept $50 per week less by accepting a lower rent, wouldn't they be liable for the difference of $50 per week until the lease ends, as well as any empty weeks plus cost of your agent filling the house (usually one week plus GST plus advertising).

You could put it to them that you either ask for the same rent they are paying and have it empty for a few weeks (or more) or advertise it lower and they pay the usual re-let fees but it is filled quickly so they could save money, even by making up the weekly loss for the remainder of the lease.

I'm sure I've read on here that there is a limit of XX number of weeks that you can make them pay? It no doubt will depend on the state and the rules in that state. I've never had this issue so only repeating what I know from reading SS.

I'm a bit of a softie, and we usually release people from leases without penalty but usually we can easily rent again for the same price or more. I'm not sure how I'd cope with knowing I would be losing out every week for the next six months due to being a softie.

Maybe you can find a win/win for both of you.

 

[jerrybee]

Do they want to break the lease just because they know they can rent someone else more cheaply?

I doubt it. Reason cited was moving interstate which I take at face value and believe based on their past record.

 

[jerrybee]

You could put it to them that you either ask for the same rent they are paying and have it empty for a few weeks (or more) or advertise it lower and they subsidise the loss you are making because they are breaking their lease.

That's a good point. I might try this. I don't want to leave them hanging.

 

[jerrybee]

the first thing VCAT would ask is why you hadn't reduced the rent and they'd be cut loose.

Would I then have to reimburse them for all the rent they've paid in that time?

And what do you think they would consider a reasonable time to be looking before having to drop the price?

 

[Sez]

No, I would find it highly unlikely you'd have to repay the whole amount of rent that they'd paid in that time, only from the time that VCAT deems would have been appropriate for you to reduce the rent.

I think that if after 3 weeks you are getting no interest or applications then you should drop the rent. Depending on how much difference is between the current rent amount and the current market amount as much as a $20 increase would certainly look very good.

The tenants may assist in holding open for inspections?

 

[travelbug]

Rather than waste weeks advertising at a rate you won't get speak to them and tell them the problem. Come to an agreement that they pay you XX amount of dollars to break the lease (the shortfall of 6 months rent at the lower level) and leave it at that.
It seems they have a genuine reason for breaking the lease. It's just unfortunate for them that rents have dropped.

You'de be an ar$s to rent it out at a rate you have no chance of getting.

 

[jerrybee]

Yes I think I will let it ride out for a few weeks since the agent tells me summer is the best time to rent and the most likely window for me to find someone willing to pay a decent price. If I don't find anyone in 2-3 weeks then I'll offer the tenant a deal.

 

[zepth]

Simple, advertise it at the current rent for a week or two and if there is no interest drop the advertised price to whatever the market rate is.

The leaving tenant will then be liable for the difference between the new rent amount and their contracted amount but you will show you made efforts to mitigate their loss.