Breaking a lease

15 Mar 2021

If a tenant or property manager/owner ends a fixed term agreement before the end date without sufficient reason they are breaking the agreement – also known as breaking the lease. A tenancy agreement is a legally binding agreement and when broken, may result in the need for compensation.

In this week’s episode we discuss breaking a lease with Matt Sturgess from Customer Experience at the RTA.

Rental law changes around ending tenancies, renting with pets and the introduction of repair orders commenced on 1 October 2022.


Host - Belinda Heit – Communication and Education – RTA  

Guest – Matt Sturgess – Customer Experience – RTA  

Host: Welcome to the Talking Tenancies podcast, brought to you by the Residential Tenancies Authority.  I’m your host, Belinda Heit. Join me as we explore everything you need to know about renting in Queensland, with experts from the RTA and industry. We're here to help make renting work for everyone.  

If a tenant or property manager/owner ends a fixed term agreement before the end date without sufficient reason, they are breaking the agreement—also known as breaking the lease. A tenancy agreement is a legally binding agreement and when broken may result in the need for compensation. 

Today's expert from the RTA is Matt Sturgess, Manager in Customer Experience. Welcome Matt. 

Guest: Thank you. 

Host: Now, can you tell us about your role at the RTA and what you're responsible for? 

Guest: Of course. So I'm one of our Customer Experience Managers. I'm currently looking after our Contact Centre and Dispute Resolution teams. 

Host: Excellent. And you're a busy man, you've been running around all afternoon and we've been trying to catch you. So today we're going to talk about breaking a lease, and it's a topic that you know you get a lot of calls on in the Customer Experience Centre. And, it's one that often causes confusion for both tenants and managing parties. So firstly, if I'm a tenant and I want to break my lease, what do I need to do and what do I need to consider? 

Guest: You're absolutely right. It’s a fantastically confusing topic at times, but I suppose what we're going to look at trying to do is simplify that for everyone out there.  

So if you're a tenant and you're looking to break your lease, I suppose the first thing that we'd always encourage is to speak to your managing party or your landlord directly, to let them know about your intentions and see if everyone can come to a mutual agreement over ending the tenancy.  

And if you are doing that and everyone’s in agreement, make sure you cover off some of the finer details about when the tenancy is going to end, if there's any compensation or anything to be paid afterwards because the lease is ending early, and bits and pieces like that—and make sure it's all documented. If there's anything that is contingent on either party agreeing to the end of the tenancy, it needs to be documented and covered by both parties, just in case there is any discrepancies further down the line. 

If no mutual agreement can be met and, as a tenant, you still need to break your lease—your role changes, you need to move interstate, you need to move to a different location, or whatever happens—as 2020 told us, anything can happen. You can't always help it and sometimes you do need to end that lease agreement early.  

So when that happens, and you can't come to a mutual agreement, as a tenant, you'll need to give notice of your intention to leave. So that's a form that you can grab from the RTA’s website. You'll need to complete that info and provide that to your property manager/landlord directly, and that includes stuff like what date you intend to hand over vacant possession of the property, and that really detailed what your intentions are to provide them notice so that they then can, I suppose, prepare the property for the next tenant, potentially. Start advertising for a new tenant, and bits and pieces like that. So although there's no official timeframe that you need to provide when you're breaking your lease—'cause you may find out that you need to move within two days—we would always encourage that you give as much notice as possible to your landlord or to the managing party so that they can, I suppose, work on trying to find a new tenant and work on ways to minimise the costs that they are going to incur, or they may incur, as a result of the lease being ended. 

Host: So, you know, when we look at the costs associated with that, what kind of cost can a tenant be expected to pay when they do break a lease? 

Guest: So I suppose when looking at this, the first thing we need to remember is that that tenancy agreement is a legally binding document. 

It's a legally binding agreement for a fixed term, unless you've rolled over into a periodic agreement —periodic tenancy rather—which is slightly different. But when we're talking about breaking a lease we're generally talking about breaking a fixed term agreement. What that means is compensation may need to be paid. 

So a tenant who is breaking the lease must pay still pay their usual rent up until they vacate the property and keys are handed over and vacant possession of the premises is handed over as per the notice. After that point we may be looking, or we're now talking about compensation for, for losses that are incurred as a result of the breach of the agreement, and that can include stuff like loss of rent can be sought as compensation.  

Now when we talk about compensation, the Act is pretty clear that we're looking at reasonable costs that are incurred as a result of the tenancy agreement being breached. So a common one is that loss of rent that is as a result of a tenant ending their agreement early, and that they may be required to pay until that loss is no longer being incurred. So a common example there is a new tenant is found, and so it may be reasonable that the outgoing tenant still pays that or pays that compensation for loss of rent up until the moment the new tenant moves in and that's no longer a cost being incurred. 

There are other costs that the tenant or the landlord may incur as a result of the tenant ending the agreement early. And, and I suppose this is where we look at stuff like if they're advertising, advertising costs that are involved with finding a new tenant, if a landlord is charged a reletting fee from the managing party or the agency that they would not have incurred had the lease and the original agreement been ongoing, these are all common. So other common costs that we see when we're talking about breaking a lease agreement are things like advertising costs, if the managing party needs to re-advertise their premises online or through other channels. As well as what's known as a reletting fee, which is a cost that's charged to the landlord, which they would not have been, which they would not have incurred, had a lease agreement been continuing. So again, what we're looking at is, is that reasonable to be charged and that's where things can get a bit more difficult. 





Host: Yeah, so, you know, and we were just talking about this a moment ago. I mean, what, what can be considered reasonable? Like what's some examples there? 

Guest: Yeah, so I suppose you’ve got your more stock standard costs that can be incurred at the end of any lease. So that could be if there's any damage to the premises or if there's any repairs that need to happen as a result of the tenant’s actions in moving out of the premises, through to the ones that are a bit more specific, which can be based on what the intention is with the property. A common example we hear about here at the RTA is where there's no intention of a landlord reletting premises. So a cost like a reletting fee would generally not be incurred if that's the case. So that shouldn't be passed on to the tenant if that cost isn't being incurred by the landlord. 

And then we get into the wonderful world of rent compensation. Now if there's no intention of reletting the premises, this is where it can become quite tricky. An example I can provide is, if there was ten months left on the lease agreement and the lease is broken, and there's an argument to say that if there's no intention to re-let the premises, then the loss of rent hasn't been caused by the tenant moving out—it's been caused by the fact there's no intention to re-let. If there's only a few weeks left of the agreement, it could be seen differently. And that's where it could be seen where, if there was only three more weeks left and there was no intention to re-let after that, there's still three weeks’ worth of rent that isn't going to be covered as a result of the lease being broken, so that may be considered reasonable.  

Here at the RTA, we can't determine what that is—it is up to parties to communicate on and, where possible, have those open, honest conversations about what each party feels is reasonable, and if they can't be in agreement, then that’s something that may be settled through the bond process or eventually down the line in QCAT if required. 

And touching on when there's only a few weeks left of the lease agreement, again, there's another argument to say we're charging a re-letting cost would be reasonable. Again, if there was only two or three weeks left of the fixed term agreement and the landlord was about to incur that cost through the property management agency anyway, it may not be deemed reasonable to pass that on to the tenant. And also situations where the premise is then re-let at a higher cost after the tenant has said that they will be leaving, if that rent is discouraging new tenants from applying for the premises that may be seen as the property manager or the landlord failing to mitigate their own loss if they're looking to substantially increase the rent. Or do so in the manner which isn't consistent with what's happening in the market, the length of time left on the tenancy can also play a part with that one as well.  

Similar to before, if there was no intention of renting the property, if it was ten months left and the rent’s being advertised at a higher amount, that may not be seen as reasonable. Whereas if there was only a couple more weeks left and the market has gone up, or something else has happened to the premises to warrant the increase, that may be seen as reasonable and compensation could still be sought in that scenario. And again, as with before, it's at the parties to agree on this. There's no black and white rules for compensation, but there are clear guidelines that they, both parties, can work within, and where no agreement can be reached there is the process through the RTA’s dispute service or eventually through the Tribunal to seek a decision. 

Host: Yeah, and I guess it's a good rule of thumb to have—wherever the term reasonable is mentioned—is to communicate and negotiate. So, in the case where a tenant finds another tenant to take over the lease after they leave, what are the implications of this? 

Guest: So again, that's a, I suppose, common scenario that tenants will look to help mitigate the loss by finding a replacement to take over the lease. However, in some situations, this is not always the most favourable course of action and a lot of times there are processes that agents and landlords have in place to find and vet a suitable tenant for their rental property. And so even though you find someone that you feel is suitable, the agency or the landlord may still be required, or they may require further checks to be done, before they can just accept the application. 

If a tenant does bring another tenant on board without consulting the agent and landlord, it becomes difficult for the managing party to exercise due diligence required to find that appropriate tenant who's a good fit for them in the property. And there still may be big costs that are incurred with this process as well. And if background checks incur a fee, again talking about compensation beforehand, that's another one where a reasonable cost may be passed on to the outgoing tenant as it's part of that managing party’s process in finding a suitable replacement. 

Host: Yeah. So if a managing party wants to end the tenancy early is that possible? 

Guest: Yes. So, a tenancy can be ended early from a managing party, but it wouldn't be the same as breaking a lease from a tenant. There are reasons under the Act which allow a managing party or a landlord to end a tenancy agreement early. So similarly with tenants, we'd always encourage that people talk first, and so if a landlord needs to move back into the property for whatever reason, if they need it vacant for a particular purpose, it's always about speaking openly and honestly between both parties first and, like with when a tenant is seeking to end their agreement, there may be stipulations involved with coming to that agreement. So, some of the common things that we hear here is stuff like tenants would then incur moving costs as a result of that tenancy being ended early. So we’d always encourage everyone that when they are talking, they consider some of those finer details around what's required and what's reasonable as part of agreeing to end that tenancy.  

And then if there there's no mutual agreement that can be reached, we'd be looking at what else the Act allows a landlord or a managing party to do. And if mutual agreement is met, again, make sure it's captured in writing, just in case has any issues further down the track. 

A common way that a landlord can end a tenancy agreement is to actually apply through the Queensland Civil and Administrative Tribunal, or QCAT as it's affectionately known. 

For reasons such as if they're suffering excessive hardship as a result of a tenancy continuing, if there are breaches of the tenancy agreement that have happened and they've been rectified but they are continuing issues that are repeated within a 12 month period, and there's also if there is a breach of the agreement that is unremedied, providing all the appropriate notices are served to the tenant. If they're not rectified within the timeframe they can be asked to leave. Again a common one for that, I suppose, if there is damage to the property that has been done or rent arrears that are outstanding that haven’t been paid. But as with everything, we’d encourage people to talk openly before these issues occur. Ideally, no surprises is the best surprise. 

Host: Yeah. And if you want to know more about the breach sort of process, we've just captured that in another episode

So, in an instance of excessive hardship, like you've just mentioned, for either a tenant or a managing party, what are their options? 

Guest: If a tenant or a landlord believes they would suffer excessive hardship if a tenancy is to continue, they have two options as we've discussed before. The first option is always to discuss with the other party and try to mutually agree on ending the tenancy. The same considerations around timeframes and compensations that we talked about earlier should be considered. But if the excessive hardship we're talking about is financial hardship, we'd always encourage people to put themselves in the other person’s shoes when negotiating or coming to that mutual agreement. 

The second option is to make that urgent application through to QCAT and seek a ruling from an adjudicator based on the individual circumstances and the evidence that they're able to present at the Tribunal. 

Host: And so, the Tribunal will obviously follow that evidence process? 

Guest: Yeah the Tribunal follows an evidence-based process. So the person who is applying to QCAT to terminate the tenancy must be able to show how they would face excessive hardship if the tenancy was not terminated. And so it does need to be backed up with evidence, it can't just be based on word of mouth I suppose. 

Host: Well, there's a lot to consider when we're breaking a lease. So thanks, Matt, for helping us to get a greater understanding on everything we need to know about breaking a lease. 
As always, if there are issues in the tenancy, let the other party know as soon as possible and talk to each other to come up with a workable solution.   

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Original publication on 15 Mar 2021
Last updated on 01 Nov 2022

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