Breaking a lease on the grounds of hardship or by giving up possession can be costly. The landlord can claim compensation for any reasonable costs they have to pay as a result of you breaking the lease.
The costs you could be liable for include:
- a reletting fee (usually one or two weeks’ rent). This must be based on the fee that the agent charged the landlord so it is a good idea to ask for a copy of the invoice
- reasonable advertising costs
- rent until new tenants move in or until the end of the fixed term (whichever happens first)
What the landlord or agent may not tell you is that you only have to pay the reletting fee and advertising costs on a pro-rata basis. This means you only have to cover these fees for the remaining term of the lease for which the landlord did not receive rent. For example, if you leave 7 months into a 12-month tenancy agreement, there is only about 40% of the fixed term remaining so you only have to pay 40% of the reletting fee and 40% of the advertising costs.
Managing the costs
If you want to break your lease, you should give as much notice as possible in writing (keep a copy of your letter). It is a good idea to state the exact date you will be leaving and that you want the landlord or agent to find a new tenant. The landlord is expected to take all reasonable steps to find a new tenant as quickly as possible. The more you can do to help find a new tenant (such as having the property available for inspection, or advertising the property yourself) the less you are likely to have to pay.
You should only pay rent up until the day that you vacate. Once the new tenants move in, you can then pay the landlord compensation for any lost rent.
You should make sure the landlord or agent are taking steps to relet the property after you give notice, and check the date that new tenants move in. The landlord has a duty to keep their loss to a minimum, so if they do anything to make it harder to find a new tenant (such as putting up the rent), or if they don’t make an effort to find a new tenant, you can argue that you should not have to pay them the full amount of compensation.
Check the ‘Properties to Let’ section in the major newspapers and the Rental Listings available from the agent. If you have internet access, you can also check the agent’s website. If the property is not being advertised or is being advertised at a higher rent, keep this as evidence that the landlord has not tried to keep their loss to a minimum.
If you think the costs that the landlord is claiming are unreasonable, don’t agree to pay. The landlord will then have to make a claim against your bond or apply to the Victorian Civil and Administrative Tribunal for compensation. The landlord must give you notice of their claim and you will have a chance to present your side of the story to the Tribunal.