What you need to know about ending an agreement early
15 May 2020
We know that situations and circumstances of tenants and property owners can change over time. If you’ve had to re-evaluate plans and finances recently, you may be considering ending your fixed term agreement early, which is also known as breaking the lease.
When either party decides to end a fixed term agreement early, they may need to pay a level of compensation. The Residential Tenancies Authority (RTA) encourages parties to communicate early, regularly, and understand their rights and responsibilities under the tenancy laws.
The Residential Tenancies and Rooming Accommodation (COVID-19 Emergency Response) Regulation 2020 introduced on 24 April 2020 contains temporary amendments to the Residential Tenancies and Rooming Accommodation Act 2008 during the COVID-19 emergency. It also has additional provisions for tenants impacted by the COVID-19 emergency who need to end their fixed term agreement early.
For tenants impacted by the COVID-19 emergency
When a tenant impacted by the COVID-19 emergency wants to end their agreement early, they may be eligible for break lease costs capped at the equivalent of one week’s rent if the tenant or their household meets the below eligibility criteria:
- they have lost 75% of their income, and
- they have less than $5000 in savings.
If the tenant or their household meets the above two criteria, they can give notice and issue a Notice of intention to leave (Form 13) to their property owner/manager with the compensation amount payable by the tenant capped at one week’s rent. Tenants may be asked to provide information to support that they meet the eligibility criteria, and they must continue to pay rent as it is due throughout the 2-week notice period.
Conciliation through the RTA can be requested by tenants, property owners or managers if there is a dispute about whether a tenant is eligible for the capped compensation amount for breaking the lease.
Refer to the Residential Tenancies Practice Guide for further information.
For tenants not impacted by the COVID-19 emergency
The normal rules and processes apply to tenants who are not suffering from excessive hardship caused by the COVID-19 emergency but want to end their fixed term agreement early.
The property owner/manager has a right to claim compensation for re-letting expenses (such as reletting fee and/or advertising costs) along with the loss of rent. This means the vacating tenant would be liable for paying the rent amount as compensation until another tenant is found, or until the end date of the agreement, whichever is earlier. Property owners/managers are legally required to mitigate losses in this situation and reduce the compensation amount payable by the tenant.
Tenants and property owners/managers should also discuss how and when the compensation amount will be paid. Tenants may choose to pay the rental compensation amount on a regular basis until the property is re-let or in a lump sum at the end. In some instances, the parties may agree to deduct these costs from the rental bond once the tenancy has ended. If the tenant is paying compensation to the property owner/manager for loss of rent for a long period of vacancy, they may request evidence of mitigation actions carried out by the property owner/manager to reduce costs and/or find a new tenant.
Communication is key to self-resolution
When either party wants to end an agreement early, it’s important to communicate as early as possible. In times of change, everyone should remain informed and work together to achieve mutually agreeable outcomes and solutions.
If tenants and property owners/managers have discussed their situation with each other and cannot reach an agreement, the RTA’s free dispute resolution service may be able to assist.
If you are impacted by the COVID-19 emergency and have attempted self-resolution, you may be eligible to apply for priority conciliation via the RTA’s new COVID-19 Dispute Resolution Web Service.