If I terminate rental contract early....

[kriscot]

Hello,
I'm wondering what penalties i could incur if i, as a landlord decide to terminate a 6 month rental contract a month or so early? Reason i ask is that i might sell my rental while it is occupied under a 6 month contract. I will probably wait till about the 3-4 month mark of the agreement and hope that a sale will coincide the end of the contact but if it sells a bit early what am i up for?

I've also considered that if the house sells close to the end of contract that i could write in the conditions of sale an extended settlement period, but i dont want to scare of any potential buyers with this.

I had a quick look through the Residential Tenancies Act but couldn't find anything specific

Thoughts?

 

[Rainshadow]

Hi. In WA, and I think would be very similar in your state, it is not as simple as "you decide to terminate". If the tenant is in a fixed term agreement, then it can only be ended by mutual agreement. So if they don't want to leave, you are stuck. You have two options so far as I know:
1. don't terminate early, just make sure the buyer is aware there is a tenant in place and the lease expiry date (make sure you give the tenant written notice that you will NOT be renewing the lease agreement!).
2. ask the tenant if they will agree to terminate the agreement early. Talk to them about this. Be prepared to offer some incentives to move - eg in the past i have seen landlords offer the new bond, moving costs, a straight cash payment (how important is this to you? $1000? $2000? $500?) and then again I have seen tenants that were planning to move anyway so happy to move a bit earlier. Just be aware that they are not under any obligation to move before the contract is up if they don't want to.

 

[Tania]

Rain

As has been mentioned you are unable to terminate merely because you want to sell the property.

I am sure most States have similar regulations but in Qld you are required to serve notice to end the Tenancy.

When a lessor/agent gives a Notice to Leave

The minimum notice period for a Notice to Leave (Form 12) (the notice given to the tenant if the lessor/agent wants them to leave) is:


7 days for unremedied rent arrears;
14 days for an unremedied general breach;
7 days for non-compliance with a Small Claims Tribunal order;
the same day for non-livability;
2 months for compulsory acquisition;
4 weeks for a sale contract signed when the tenants are on a periodic agreement;
2 month's 'without grounds' (no reason) under a periodic agreement; and
14 days or the end of the term (whichever is later) 'without grounds' under a fixed term agreement.

All you want to ensure that the appropriate days notice is given prior to the expiry of the agreement otherwise the tenancy will roll over to a periodic agreement where upto 60 days notice may have to then be served.

Like it or not Tenants also have rights. Why not get your Managing Agent to talk to them and sound them out about leaving early especially if you are offering to offer them some financial assistance.

 

[Firsthomelooker]

From the Residential Tenancies Regulations http://www.legislation.nsw.gov.au/maintop/scanact/inforce/NONE/0

"6. How to end a fixed term agreement

A fixed term agreement may be ended for the following reasons, provided that at least 14 days’ notice is given:
(a) if the tenant breaks one of the agreement’s terms,
(b) if the tenant is more than 14 days in arrears of rent,
(c) if the landlord breaks one of the agreement’s terms,
(d) if the landlord or tenant want to end the tenancy at the end of a fixed term agreement (in which case, notice can be given until the final day of the fixed term period, otherwise the agreement becomes a continuing agreement).

7. How to end a continuing agreement

(1) Unlike fixed term agreements, the amount of notice that a tenant or a landlord must give to end a continuing agreement is not always the same.
(2) A continuing agreement may be ended by a landlord in the following ways:
(a) without stating a reason (in which case at least 60 days’ notice must be given),
(b) on exchange of a sale contract that requires vacant possession of the rented premises (in which case at least 30 days’ notice must be given),
(c) if the tenant breaks one of the agreement’s terms or is more than 14 days in arrears of rent (in which case at least 14 days’ notice must be given).
(3) A continuing agreement may be ended by a tenant:
(a) without reason (in which case at least 21 days’ notice must be given), or
(b) if the landlord breaks one of the agreement’s terms (in which case at least 14 days’ notice must be given."

Ie you do not have grounds to terminate under a fixed term. You must wait until it becomes periodic and then you need to give them 30 days notice after you exchange the contract of sale.

 

[alexlee]

Just offer them money. You can terminate a lease if you both agree to it.
Alex