The balance of power generally lies with the landlord in Australia's overheated rental market.
Long-term residential leases are virtually unheard of, and landlords can raise your rent as often as every six months when you're on a periodic (or 'fixed-term') lease. (NSW, the ACT, Tasmania and South Australia are the exceptions, where rent increases are limited to once in a twelve-month period.)
After signing a lease, many tenants just want to hunker down and stay on the landlord's good side so they can keep a roof over their heads.
But what if you need to bail out before the lease is up? We outline the laws and costs involved.
If you're on a rolling or periodic lease you can terminate your lease at any time by giving the required amount of notice. But it's another story if you're part-way through a fixed-term lease.
When you sign a fixed-term lease, you're signing a binding contract that says you'll pay the specified rent for a minimum period.
Ned Cutcher, speaking in his capacity as a senior policy officer at the NSW Tenants Union, tells us that breaking a lease certainly isn't something you should do lightly.
Terminating a lease early can be a costly exercise, as you may be liable to compensate the landlord for their losses.
If the amount you owe the landlord is higher than your bond, there's also a risk you could be listed on a tenancy database, sometimes referred to as a 'blacklist'. These databases are run by private companies and keep information on prospective tenants.
You can only be listed on these databases for two reasons:
- Because you've moved out and still owe an amount more than the rental bond.
- Because the lease has been terminated by a tribunal owing to something you have done wrong.
You may be liable to compensate the landlord for:
- rent until new tenants move in or until the end of the fixed term (whichever happens first)
- advertising costs
- reletting fees, such as an agent's fees (agent's fees can't be charged in Tasmania as it is an owner's choice to have the property managed, according to Consumer Affairs Tasmania).
"Depending on the market conditions at the time of the lease break, the costs for rent can quickly mount up to thousands of dollars," says Yaelle Caspi, senior policy officer at the Tenants Union of Victoria.
There are a number of legally specified reasons for terminating a lease, which vary slightly across each state and territory, but you generally need your local tribunal to make an order on these grounds for these to apply. Without a legal reason, breaking your lease could be treated as abandoning the tenancy.
Some common legal reasons allowing for early termination include:
If continuing the tenancy would cause you to experience undue financial hardship, most states and territories have legislation which allows you to apply to the tribunal to have the lease terminated. However, you may still be liable to pay compensation.
The premises become uninhabitable
If the property becomes unliveable, you can usually terminate the agreement early. This is generally taken to mean that the property is dangerous or poses a health hazard. For example, if there's inadequate ventilation, drainage or lighting, or if there's defective construction.
Breach (or repeated breach) of an agreement by landlord
If the landlord breaches the tenancy agreement you'll generally be able to apply to have the agreement terminated. Some states require the breach to have occurred several times before they'll permit this.
A breach may be:
- a landlord not remedying a fault outlined in a repair notice
- not keeping the locks in good working order
- the landlord not respecting your right to privacy and entering the property without notice.
Renters in NSW, WA and Queensland can break a lease in domestic abuse situations, and in Tasmania a renter can break a lease if a court makes a Family Violence Order against a tenant at the premises.
In the above states, tenants affected by domestic or family violence can break a lease with seven days notice after providing rental agents or landlords with the relevant forms and evidence and can leave the premises immediately.
In South Australia, you'll need an intervention order from a court or the police, and will have to take the matter to the state tribunal before breaking a lease.
In Victoria, you'll also need to go through the tribunal process, though no intervention order is required. In cases of domestic violence, the Victorian tribunal must hear the case within three days of it being lodged.
In the ACT, if a tenant is affected by family violence, they will need to have a protection order in place and must apply to the ACT Civil & Administrative Tribunal to have their lease terminated.
In the Northern Territory, a local court judge or the NT tribunal can rule that an abusive partner's name be removed from a lease if a domestic violence order is in place, but a Premises Access Order is required to prevent the abusive partner from accessing the property. If a tenant affected by domestic violence wants to leave the rental property, they should apply to the Northern Territory Civil and Administrative Tribunal and request that their lease be terminated due to domestic violence.
See the state and territory breakdown for more information.
To ensure compensation costs are based on the actual fees paid, ask for a copy of invoices for any reletting or advertising costs.
If you do need to break a fixed-term agreement, you should give the landlord plenty of notice.
Ideally you'll be able to negotiate with the landlord for a mutually agreeable arrangement (some landlords may agree not to be compensated at all, but you should get this in writing).
If you don't reach an agreement, you'll still be liable to pay compensation, but the landlord will need to apply to the local tribunal for the compensation amount to be determined.
If this happens, tenants' unions generally recommend you stop paying rent on the day you specify to move out (but keep the money aside) and wait for the outcome of the tribunal, as this encourages the landlord to look for a new tenant as quickly as possible.
A landlord is entitled to be compensated for their losses … but they shouldn't make a profit from you breaking a lease
Landlords are required to mitigate their losses, which means they need to try to find a new tenant as soon as possible. Cutcher says that past tribunal decisions have found that landlords have failed to mitigate their losses by advertising the property at a higher rate or at a later date than when the tenant vacated.
Advice for tenants
Cutcher advises keeping an eye on the advertising campaign for the property to ensure the landlord is doing as much as they can to get a new tenant. If they're not, this should be factored into the amount of compensation being paid.
A landlord is entitled to be compensated for their losses, but as a general rule they shouldn't make a profit from you breaking a lease and should keep the costs you'll be required to pay in compensation to a minimum.
You shouldn't, for example, be charged rent once a new tenant moves in, and advertising costs and reletting fees should be limited to the genuine costs experienced by the landlord. You may want to ask for a copy of invoices for any reletting or advertising costs to make sure costs are based on the actual fees paid.
Most tenants' unions and some consumer affairs bodies also make the argument that any fees should be paid on a pro-rata basis. So if, for example, you break the lease six months into a 12-month tenancy, you can argue you should be charged only 50% of the fees, as there is only 50% of the lease remaining.
A landlord may try to get a fixed break-lease fee if you terminate an agreement, but most states and territories don't provide for this in their legislation.
The exception is NSW, where new rules took effect in 2020 that make break lease fees mandatory and the only form of compensation available to landlords for fixed-term lease agreements signed after 23 March 2020.
For fixed-term leases of less than three years signed in NSW after 23 March 2020, the amount you have to pay to break a lease depends on how far you are into the fixed-term period:
- Four weeks rent if less than 25% of the agreement has expired.
- Three weeks rent if 25% or more but less than 50% of the agreement has expired.
- Two weeks rent if 50% or more but less than 75% of the agreement has expired.
- One week's rent if 75% or more of the agreement has expired.
For fixed-term leases signed in NSW before 23 March 2020 where the break lease fee is included in the rental agreement, the rules are as follows:
- Six weeks rent if the tenant leaves in the first half of the fixed-term agreement.
- Four weeks rent if the tenant leaves in the second half of the fixed-term agreement.
If there's no fee included in the lease, you may have to compensate the landlord for expenses including advertising costs, re-letting fees and lost rent until a new tenant is found.
- If you think you have grounds to terminate early, you'll probably need to apply to the local tribunal for a ruling. Contact your local tenants' union for advice.
- If you don't have legal grounds, try to give the landlord plenty of notice. Be amicable and discuss whether they may be willing to end the lease by mutual agreement without penalty, and without going to the tribunal.
- You may also want to transfer your lease to someone else to reduce your potential liability. You'll need approval from the landlord for this, but they'll usually need a good reason to turn it down.
- Check the advertising campaign for the property – is it being advertised online? And for the same price? At the earliest date available? If not, keep records of this.
- If you're charged any reletting or advertising costs, you can argue these should be paid on a pro-rata basis – for example, if you've got only 50% of the lease left, you should pay only 50% of the fees.
- Ask for itemised invoices of costs to make sure you're paying the actual costs incurred.
- Contact your local tenants' union for advice on what to do.
This should be used as a guide only and not be taken as legal advice. If you need to terminate your lease early, contact your local tenants' union for advice.
Stock images: Getty, unless otherwise stated.