So, you’ve just found out that your tenant wants to leave and you’re only a few months into the relationship. Now what?
Firstly, don’t take it personally. There are many reasons why a tenant might need to break their lease and prematurely end the tenancy. Usual reasons include work relocations and changes in family circumstances.
In fact, when the rental market is soft (as it is now) and rents start dropping, some tenants may decide to break their lease simply to move to a better or more affordable property.
[sam id=37 codes=’true’]Can your tenant just terminate automatically?
No, they need your permission first and any agreement to terminate must be in writing, typically in the form of break-lease agreement that details all the costs and responsibilities involved.
Of course, you can agree to let them out of the lease with no cost, but that would usually be unwise.
A residential tenancy agreement is a legal contract and so you are entitled to ensure your financial position is no worse off as a result of the tenant breaking the tenancy agreement.
What costs are involved?
The laws differ from state to state but as a general rule the tenant is responsible for a number of costs.
For starters, the tenant will typically have to pay rent until a new tenancy agreement commences or the original tenancy expires (whichever comes first).
But it doesn’t stop there.
The tenant will also have to compensate you for reasonable costs, including a proportion of the advertising and letting fees, which you will incur as a result of the break lease.
Even maintenance costs (e.g. for lawn mowing) may be included.
The tenant has the option of advertising the property themselves to help find a new tenant, but this doesn’t remove their obligation to compensate you for advertising fees.
What’s your role in all this?
Well, both you and your property manager will need to take all reasonable steps to re-let the premises as soon as possible.
Otherwise, your tenant could make a claim to reduce their costs by arguing that you haven’t mitigated their risk.
Subscribe & don’t miss a single episode of Michael Yardney’s podcast
Hear Michael & a select panel of guest experts discuss property investment, success & money related topics. Subscribe now, whether you're on an Apple or Android handset.
Need help listening to Michael Yardney’s podcast from your phone or tablet?
We have created easy to follow instructions for you whether you're on iPhone / iPad or an Android device.
Prefer to subscribe via email?
Join Michael Yardney's inner circle of daily subscribers and get into the head of Australia's best property investment advisor and a wide team of leading property researchers and commentators.