Tenant wants to break lease

Hi all

The tenant in our Frankston South property wants to break their lease, as they're having to travel too far to their new jobs. The lease runs until May 2015, but they'd like to leave in two months or so. My wife feels that they should have to find replacement tenants to move in and take over the existing lease (she comes from a commercial property background), but given the suburb I'm concerned about them finding a new tenant who hasn't been vetted by an estate agency. My view is to allow them to leave at the end of January and for us to find new tenants during that month, a better time to look for new tenants than in May. Being a bayside suburb, I'd also think summer is a more appealing time to new tenants than later in May.

Your thoughts?

Regards,
GreenGoblin
 
Well, if they want to break the lease, they want to break the lease.
Theoretically they are supposed to find you a new tenant. You can find yourself the new tenant and charge the exiting tenant for the costs of this.
In my case, I hire a PM, so costs would be re-advertising (110% of 1 week's rent) + some advertising and admin blah blah blah fees (about a hundred dollars) + any shortfall in rent until the new tenant takes over. Your existing tenant is legally bound to pay the rent until the end of their contract (but they could stop paying the rent at any time.....).
You can sue your exiting tenant if they don't agree to all this, but unless it's worth it, what can you do.
I suggest you find a new tenant, recover what you can from the exiting tenant and move on.
 
As suggested- read what the rules state.
You cannot expect your tenant to find a new tenant. BUT they are liable for the rent until the lease expires.

If you get a new tenant then they can be released from the agreement. they need to pay costs associated with that.
 
Read from the tenants side this article here from Tenants Union of Victoria.

http://www.tuv.org.au/articles/files/resources/AL_breaking_a_lease.pdf

The tenants union of Victoria actually advise to only pay rent until the day they leave, irrespective of how much longer it takes to rent the property. So beware of this, it happened to me and we had to take them to VCAT to recoup costs from bond.

If you're self managing, you really need to be aware of the legislation.
 
If this happened to me, (and assuming you think it will be easy to find a new tenant at a time you choose to release them), I would agree to break the lease with no penalty except that they pay the cost to relet (which would be one week's rent plus GST plus any advertising). Personally, I would not chase them for lost rent if they agreed to stay until that time, which is peak letting time for our IPs.

We've released tenants without penalty before, and I find it easier to choose the time rather than have the tenant leave the week before Christmas (I've had that too). Also, we've never really had an empty IP for more than a week (except when we had a PM finding us a tenant - they don't seem to care nearly as much as we do if it sits empty while they do their checks).

Your decision will depend on the rules for your state on what you are entitled to, but that doesn't mean you will get what you are entitled to without a fight or a tribunal visit and the associated hassle. So, knowing they want to leave, I'd try for the middle ground and have them agree to get past the difficult Christmas and New Year periods which generally are slow for renting in exchange for a maximum cost to them of one week's rent plus advertising if needed (if your laws allow that).
 
Miss Green Eyes and Travelbug, the law changed in Jan 2012 in NSW on what you are aloowed to charge a tenant for break lease fee. Tenant can break their lease at any time and they are responsible for rent until they move out plus 6 weeks break lease fee if broken in first half of the lease and only 4 weeks break lease in 2nd half of lease (+ rent until they move out).
 
Miss Green Eyes and Travelbug, the law changed in Jan 2012 in NSW on what you are aloowed to charge a tenant for break lease fee. Tenant can break their lease at any time and they are responsible for rent until they move out plus 6 weeks break lease fee if broken in first half of the lease and only 4 weeks break lease in 2nd half of lease (+ rent until they move out).

Not quite right. The 6 or 4 weeks is the full extent of their liability - you don't get rent on top of that.
 
Not quite right. The 6 or 4 weeks is the full extent of their liability - you don't get rent on top of that.

Can you clarify please? Tenant states 1 Feb they want to leave at the end of February in the second half of their tenancy. Does this mean once they leave at the end of Feb, the landlord can access up to 4 weeks of rent? Or are you saying the 4 weeks starts at notification, and it's up to the landlord to organise replacement tenants?
 
Ah, lease breaks!

Some people "try it on" by attempting to charge the outgoing tenants the full leasing fee (ie. 1 weeks rent), but the technical answer is you can only charge a prorata amount depending on the months left on the tenancy.

If it went to VCAT you need to display you've done everything to mitigate the tenants loss, which includes advertising at the same rate/market rent, conducting inspections etc.

Obviously things are different from state to state, and I'm no expert on NSW. But above is your basic Vic
 
Can you clarify please? Tenant states 1 Feb they want to leave at the end of February in the second half of their tenancy. Does this mean once they leave at the end of Feb, the landlord can access up to 4 weeks of rent? Or are you saying the 4 weeks starts at notification, and it's up to the landlord to organise replacement tenants?

The 4 weeks starts from the date they vacate.

Not sure what the replacement tenants have to do with it?
 
Miss Green Eye, Thats why landlord insurance is so important to protect landlords. But most landlord wont protect themselves for some reason. Look at it this way when you take out building insurance it normally protects you for fire damage. You dont want the property to catch on fire but just in case you protect yourself. Why is lanlord insurance any different?:confused:
 
Frankston South - priced right and in the Frankston High School Zone?? You shouldn't have any issues re-letting the property.

I'm doubling up on a few other comments but with a lease break you can charge the tenant rent until the day before a new tenancy contract begins and pro-rata letting fee (as Lil Skater said) and advertising costs if you incur any (Such as a for lease board etc.).

It may be worthwhile engaging a PM to handle the lease break and re-letting and discuss those charges with the tenant for you. It can be a tricky area and as others have said there is only so long you can hold the tenant liable for rent if the property doesn't lease. While there are no set time frames in VIC for how long a tenant is liable you need to be getting it all cleared up quickly to avoid any VCAT hearings and bad blood with their tenant.

You need to advertise at the same rate they are currently paying and if you aren't getting applications within the first 2 weeks of advertising and opens then you need to reduce the rent as you need to be able to display that you have done all in your power to minimise the loss to both the tenants and yourself. When VCAT rules on these things they look at who is going to suffer a greater financial loss, the tenant or landlord, and decides from there. Sadly, they often decide the tenant paying double rent has suffered more despite the fact they are breaking a contract.

If it is all starting to sound too hard, remember, anything can be agreed to in writing! Talk to your tenants, ask them what date they would be vacating and maybe suggest to them that you will let them vacate the property early if they pay rent up to and including their vacate date with an additional 4 weeks rent paid as compensation to cover re-leasing costs (don't receipt this money as rent, just compensation). Then lease out as quickly as possible!

Let us know how you go!
 
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