Managing

Mitigating loss after lease breaks

Sep 2016

By Gabrielle Mewing, Adjudicator, QCAT

When a tenant breaks a lease, the lessor can apply to the Queensland Civil and Administrative Tribunal (QCAT) to claim compensation from the tenant for any loss or expense suffered because of the lease break.

The compensation claim may include:

  • payment of rent until another tenant is found
  • repairs
  • cleaning
  • break lease fees, such as real estate agents’ administration fees
  • advertising expenses to relet the property.

In these applications, the tribunal must look at whether the lessor has made an effort to limit the loss or expense. This is known as the ‘duty to mitigate loss or expense’ as per s 362 of the Residential Tenancies and Rooming Accommodation Act (2008).

The lessor’s duty to mitigate loss or expense

If a lessor incurs a loss or expense because the tenant has:

  • not handed over the property after QCAT has made a termination order; or
  • abandoned the premises; or
  • breached the lease or done anything else which results in loss or expense to the lessor,

the lessor must take reasonable steps, such as issuing a Notice to remedy breach (Form 11), to mitigate loss or expense.

A lessor cannot receive compensation for any loss or expense that could have been avoided by taking these steps.

Evidence of mitigation

Every case will be different, but QCAT will generally look at the following when deciding whether a lessor properly mitigated loss or expense when a tenant broke the lease.

Type of loss or expense What QCAT considers Evidence required
Unpaid rent prior to lease break
  • Rent ledger
  • Notices to remedy breach
  • Proof of arrangements between the parties (eg payment plans)
Loss of rent after lease break
  • Did the lessor act quickly to advertise the premises?
  • Was a new tenant found within a reasonable time?
  • If necessary, did the lessor reduce the rent in line with market conditions?
  • Did the lessor unreasonably reject prospective tenants?
  • If the premises could not be immediately re-let (eg because of damage), did the lessor repair the damage within a reasonable time?
  • Proof of advertising
  • Applications from prospective tenants
  • Log of enquiries made about the rental property
  • Proof of damage and efforts to fix it
Advertising and re-letting fees
  • Are the advertising expenses reasonable?
  • Is the break lease fee reasonable?
  • Invoices for advertising
  • How fees are calculated
Unpaid water or utilities bills
  • Does the lease state that the tenant must pay the lessor for water or utilities?
  • Are the premises water efficient?
  • Did the lessor give bills to the tenant within a reasonable period of time since receiving them?
  • Lease showing tenant must pay landlord for water or utilities
  • Water efficiency certificate
  • Proof of when bills were given
Damage to property
  • Did the lessor act within a reasonable period of time (eg by issuing a notice to remedy breach) on first becoming aware of the damage?
  • Did the lessor act quickly to repair the damage or clean the property?
  • Has the lessor satisfied the obligation to maintain the premises?
  • Exit and entry condition reports
  • Notices to remedy breach
  • Photos showing damage
  • Quotes or invoices detailing the work done

How QCAT reaches a decision

The tribunal will analyse the lessor’s evidence of loss and expense in a claim for compensation and determine whether they have made adequate efforts to mitigate it.

Even if the tenant does not appear at the hearing to contest the lessor’s application, the tribunal will not automatically decide a compensation claim in the lessor’s favour. Rather, it will always test the lessor’s evidence to assess whether the mitigation obligation has been met.

For more information, contact QCAT.