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around break leases

Discussion in 'Property Management' started by Excalibur1, 29th Apr, 2016.

  1. Excalibur1

    Excalibur1 Well-Known Member

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    Just wanted to clarify something about break lease....

    A friend of mine (who is international student with limited English) did a break lease.
    He was happy to pay the fees associated with it.

    His rent is paid up to 11th of May (it got debited on 27th April for 2 weeks). However his break lease was done on 28th April. The agent took the keys off him and when he asked for refund of the unused days he refused to give it to him saying they don't do refunds and they they already have a showing lined up for tomorrow and on Saturday. Can this happen? Is he entitled for that refund considering the property is vacated?

    Your advise is much appreciated. I wouldn't want him to loose those 2 weeks if he doesn't have to.

    Cheers
     
  2. EN710

    EN710 Well-Known Member

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    His break lease usually mean he need to pay rent until new tenant is found. Check the tenancy law in his State
     
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  3. DaveM

    DaveM Adelaide Buyers Agent & KFC Strategist Business Member

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    If in NSW the lease will stipulate the break lease penalty, either X weeks or rent until a new tenant is found.
     
  4. thatbum

    thatbum Well-Known Member

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    The owner is unlikely to have crystalised the exact amount of loss until a new tenant is found. Until that time, its hard to tell whether your friend is entitled to a refund or not.

    If you are talking about an interim refund, well I can understand an agent who is reluctant to give one pending a final assessment of liability.
     
  5. emza

    emza Well-Known Member

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    Break lease clauses in leases aren't enforceable. People pay the amount because it's easier than arguing.

    If your friend was thinking ahead he would not have paid the rent in advance.

    The various QCAT/VCAT/etc may grant "reasonable reletting fees" however.

    Basically, your friend is a bit screwed. He could ask bank to reverse transaction by saying lease was over and shouldn't have happened.

    If an ordinary lease has ended and another direct debit went through after that, the real estate agent can't just keep the money.

    Arguably, a break lease and keys returned means it's done. A full money transfer at that point can't be just kept by the agents.

    Has the final inspection been done? Are they getting their bond returned? If people are coming through the property then the condition report needs to be finalised before that.

    Otherwise, I'd suggest call state tenants union and see what situation is.
     
  6. DaveM

    DaveM Adelaide Buyers Agent & KFC Strategist Business Member

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    I believe the NSW legislation (where the OP is) would disagree
     
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  7. D.T.

    D.T. Adelaide Property Manager Business Member

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    :eek:
     
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  8. Lil Skater

    Lil Skater Well-Known Member Business Member

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    Don't know where you got this information, considering I went to VCAT yesterday for a break lease. Was awarded everything for a $4,500 claim. Over $2,500 was for lease break charges and rent. Gets expensive when you break lease 2 months in for a middle range property.

    Back to the OP, the tenant is responsible (in Vic) to pay all rent up until a new tenant is found, or end of lease term whichever comes first - plus advertising, letting fees etc.

    However, the agent is not to debit after a tenancy has ended and should be making these deductions from the bond with all overpaid rent refunded. This is my process and is much more favourable should the matter go to VCAT.

    Not ideal from landlord point of view, but any overpaid amount after the tenancy ceased technically needs to be refunded and then compensation sought after the fact.
     
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  9. Scott No Mates

    Scott No Mates Well-Known Member

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    I take it that the property is in NSW, OP is Sydney based.

    If the lease relies on cl 41 of the standard RTA lease, break fee is 6/4 weeks rent - end of story. So effectively if rent is paid up to date, tenant vacates and pays 4/6 weeks rent. If it doesn't lease, tough you have no further liability to the landlord. You don't pay advertising or rent until replacement is found as you have paid the break fee.

    41. The tenant agrees that, if the tenant ends the residential tenancy agreement before the end of the fixed term of the agreement, the tenant must pay a break fee of the following amount:
    41.1 if the fixed term is for 3 years or less, 6 weeks rent if less than half of the term has expired or 4 weeks rent in any other case, or
    41.2 if the fixed term is for more than 3 years,
    [specify amount]:
     
  10. JacM

    JacM VIC Buyer's Agent Business Member

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    I think the agent probably chose his/her words poorly. They will be required to refund any money paid that is not chewed up by rent owed till new tenant found, sharing costs of advertising and re-leasing, doing water meter reading etc. I seriously doubt there will be anything left, even if they find and sign a tenant straight away. More like your friend will still owe rent. He should not dig his heels in and refuse or he can be put on the bad tenant database and will struggle to secure another rental property in the future.
     
  11. Scott No Mates

    Scott No Mates Well-Known Member

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    @JacM - each state is different. I quoted the NSW lease. Fee is 4-6 weeks on top of rent up to the handover date.

    @Excalibur1 - The break fee goes towards advertising, letting fee & lease preparation fee as the landlord shouldn't be out of pocket.
     
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  12. JacM

    JacM VIC Buyer's Agent Business Member

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    Good point @Scott No Mates . Each state is indeed different. In VIC the tenant must pay the rent till a replacement tenant is found, and share in the re-leasing costs, and water meter reading. Irrespective of state, I cannot imagine that the 2 weeks of rent money the OP's friend has paid would have any money left over after helping to pay all that.
     
  13. emza

    emza Well-Known Member

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    Lot of misinfo here! In Victoria the tenant doesn't pay until a new tenant is found - then agents wouldn't do anything until the official end of the lease! You'll see terms like "reasonable time" being used.

    As for "not enforceable" - leases can and do often contain all sorts of things not found in the applicable tenancy act. For example, in Vic they often say carpets must be professionally cleaned on exit. This is not enforceable however and no agent will go to VCAT on it.

    Unless the Act itself contains the rules, magistrate may find it unenforceable. Clauses stating rent must be paid until new tenant found or X weeks rent must be paid. These vary at the whim of whomever put the figures in - this is the very heart of unenforceable.

    At a hearing a magistrate may indeed award money and is likely to but also the agent would have to show they made every attempt to re-lease quickly. They can't take three weeks and expect the lease holder to pay that.

    I know it's a little controversial on a landlord forum and in most cases people just pay or do whatever the lease says but ultimately the Act overrules the lease.

    Eg NSW info: Breaking_a_lease_early

    Note the word "may". Not will or must. I haven't read the Act but this is usually a sign set costs are not defined.
     
  14. emza

    emza Well-Known Member

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    That's an optional break lease fee that may or may not be in the lease.

    The issue for this guy though isn't the break lease costs - it's the rent. It appears they paid the break lease costs. Therefore it's done and keys are back so the agent needs to hand back the extra rent. The entire point of the optional break lease clause is to limit costs of breaking lease.

    The agent can't keep extra rent if the break lease was executed and finalised on a particular day.
     
  15. Lil Skater

    Lil Skater Well-Known Member Business Member

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    @emza - I think you have the misinformation. I want make clear I am only talking about Vic legislation and cannot make comment on others. Whilst some of your points have credit, I want to ensure the correct information is out there.

    A tenant DOES pay rent until a new tenant is found or end of lease. There is however such a thing as reasonable time, but this changes depending on market conditions, location of property etc. I have tested this many, many times at VCAT. In high vacancy periods I have provided evidence on this, all inspections, enquiries etc. to prove why it's taken longer than expected to lease. The one I took to VCAT yesterday took 10 days to lease from keys being returned, new tenant moved in 8 days later. Entire 18 days awarded at VCAT.

    Re carpets - yes, you are correct. This is not enforceable, unless the carpets are visibly dirty you don't have to. However I have gone to VCAT for it (among other claims) and won on numerous occasions.

    The member may find conditions outside of the tenancies act are not enforceable, however in court the use of case law is used often. Just because it's not in there, doesn't mean they won't award on previous rulings. There is actually a VCAT Act which is separate to the RTA, a good read.

    Break lease charges are based on the previously paid charges on a pro rata basis, in the event there was no charge (ie. Lease renewal to the same tenant) VCAT will often not award advertising or letting fees as there was no "loss" on that instance of the lease. However a break lease is a breach of tenancy, they will award rent if it is reasonable. To have the costs awarded you will need to provide evidence that the costs were paid out by the owner for the amount stated.

    Three weeks to release a property in most cases would be seen as "reasonable", as long as you can show you have done all possible to "mitigate the cost" to the tenant. This would include vacancy rates, inspections, enquiry etc.

    The Act does overrule the lease agreement, however with a break lease the lease agreement has been breached by the tenant and therefore they are liable to ensure that the owner is not out of pocket, as is the owner responsible to reduce the costs to the tenant.

    Also, for what it's worth, more information here Consumer Affairs Victoria
     
    Last edited: 29th Apr, 2016
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  16. thatbum

    thatbum Well-Known Member

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    I think a lot of people on this thread are essentially saying similar things!

    Break lease liability is essentially the same in all states except for NSW, where there are specific provisions that override the common law, if the provisions are used in the form of a break lease fee clause on the standard lease agreement.

    Its essentially the opposite situation in every other state, where any attempt to put in break lease clauses are void, if it differs from the common law method of calculating liability.

    Hence the confusion in these situations.
     
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  17. emza

    emza Well-Known Member

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    We don't disagee :)

    On points such as "tenant pays until end of lease" - no, not unless the tenant broke the lease with a few weeks to go until the end anyway!

    The definition of "reasonable" doesn't stretch to six months I suspect.

    PMs love putting in unenforceable clauses - the carpet cleaning one is a classic. Pet clauses stating flea treatment required upon exit is another.

    We have one right now where we rent - the very standard wooden venetians are meant to be "professionally cleaned" and a receipt provided. When we leave a cleaner will do this anyway because cleaning sucks but this is definitely an unenforceable clause.

    In regard to the OP's friend - the moment those fees were paid and keys went back, the deal is done. If the agent found $500 in the house the next day it sounds like they'd try to keep that too!

    Definitely not disputing that reasonable costs can be awarded but the way some PMs behave they think they could demand a fruit basket upon exit and it would be valid "because it's in the lease".
     
  18. Joynz

    Joynz Well-Known Member

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    I think it varies by state, as mentioned by previous posters.

    Here is a quote from the Residential Tenancy Agreement for my IP in Victoria:

    'The Tenant hereby agrees that should they choose to assign or cancel the Tenancy Agreement ...they will be fully liable to reimburse the Landlord for reletting costs including a pro-rata letting fee any advertising / marketing costs incurred, rental database checks on each applicant, and rent on the premises until such time as the Tenancy Agreement on the premises is assigned or cancelled or the expiry of the Tenancy Agreement,whichever occurs first.'

    This is followed by a list of related conditions: '...Tenants will:
    B) continue to pay rent in accordance with the lease agreement until the commencement of the new agreement
    C) Pay the agent a pro-rata letting fed which is equivalent 1.1 weeks rent for the balance of the lease agreement plus all advertising costs.
    D) Agree the bond held by the Residential Tenancies Authority is to remain in place until such time that the Premises are relet and the costs as per item 1(c) are paid by the tenant.'
     
    Last edited: 30th Apr, 2016
  19. emza

    emza Well-Known Member

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    That's a good example of an unenforceable clause. The Act allows for reasonable costs to be charged and the PM must make every effort to keep tenant costs down.
     
  20. DaveM

    DaveM Adelaide Buyers Agent & KFC Strategist Business Member

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    Sorry I am confused... You are clearly an advocate for abiding by legislation which is great, but then allow your own agent to use illegal clauses in your ip agreements to your own tenants?