Ending a fixed term lease early
A tenant cannot end a fixed term lease early without being held responsible for costs related to reletting the property, unless the landlord/agent agrees not to claim these costs. Make sure any agreement not to claim costs is in writing.
If a tenant moves out of the property before the end of a fixed term agreement, they are breaking the lease and a landlord can claim costs for:
- loss of rent until the property is relet
- reletting – fee charged to the landlord by an agent.
These costs can be claimed even if the tenant leaves after a breach notice for rent arrears is served.
Reletting the property
When a tenant leaves a property before the lease ends, they have abandoned it. The landlord is entitled to claim any loss caused by the abandonment. A claim can’t be made if the landlord doesn’t try to relet the property as soon as possible – this is called ‘mitigating’ the loss.
The tenant can assess if the loss is being mitigated by asking:
- Is the property being advertised appropriately?
- Is the property being shown to prospective tenants?
- Has demand in this area dropped and should the rent be reduced? When trying to relet, the landlord should review the rent amount regularly.
- If the property has been advertised at a higher rent, has this delayed the property being leased?
The landlord doesn’t have to advertise before the tenant gives back possession of the property. If the date the tenant will leave is unclear, the landlord should be cautious about advertising as there is still a binding lease agreement.
Formulas developed by the South Australian Civil and Administrative Tribunal (SACAT) must be applied to all advertising and reletting costs. Do not apply the formula if the tenant:
- breaks their lease in the first quarter of the lease term, as the full costs can be claimed
- pays rent to the end of their fixed term lease, as lease obligations are met.
The SACAT formula must be applied to all advertising costs – including any advertisements placed before the tenant moves out. The total term of the tenancy must be used, for example, two twelve month terms is a two year tenancy.
Advertising using media other than Adelaide newspapers such as the internet, is reasonable, but will need to be proven as the best option for advertising the property. Claims should be made using standard charges as tenants are not expected to pay for corporate headers and branding.
Formula for advertising fee
Each year is counted as 52 weeks.
Formula for a reletting fee
The SACAT formula must be applied to the letting fee charged by an agent. The agent can add GST to the reletting fee before the formula is applied.
The total term of the tenancy agreement is used to work out the claim for the letting fee.
Loss of rent
Even if the tenant has moved out, they are responsible for rent until the property is relet or until the official date the lease ends – this is called 'compensation for loss of rent’. If the tenant stops paying rent, the landlord can claim compensation from the bond or directly from the tenant when the tenancy ends.
If the rent needs to be reduced to relet the property quickly, the landlord can claim the difference in rent from the tenant up to the date their lease ends.
If the property is relet at a higher rent, the landlord is profiting from the lease break. The tenant can expect the profit to be offset against the landlords losses such as loss of rent, advertising and reletting fee.
A tenant or landlord can apply to SACAT to end the tenancy if continuing it will cause them undue hardship. Generally, ‘undue hardship’ doesn’t include financial difficulties.