NSW NSW "Break Lease" changes

New rules on Lease Breaks for any NSW Landlords now in effect.....

https://www.fairtrading.nsw.gov.au/__data/assets/pdf_file/0010/608383/Landlord-information-statement.pdf

Ridiculous.

 

Yep! In most cases you are now better having a continuing agreement in place, at least you will get 3 weeks notice.

 

True, I hadn't really thought of that.

 

Hi, sorry I am a little late to this thread. I am a NSW landlord of 1 property.

But can I clarify that the interpretation here is that there is in effect no notice period for a tenant who wishes to break the lease during a fixed term?

So a tenant informs on Monday and moves out. Landlord receives 'break fee' (depending on how much of the term has elapsed). So landlord effectively receives 1 extra weeks rent and that's it?

It does sound like I might be better off letting the lease stay on periodic (which is where it is now). The tenant's salary went down due to COVID. But to be fair the rent is still only about 20% of his gross income - similar to when the lease first started - so they should be happy to stay.

 

Its on a sliding scale so its 1 week in the last quarter of a fixed term.

One difference is on a periodic tenancy you get 21 days notice, but the tenant may or may not provide access for inspections, although in a break lease you get the break fee and full access to the property.

 

Logic says this would just encourage landlords to offer shorter periods or periodic as mentioned above.
Ie If you went to a 2 year lease, last 6 months only 1 week so either offer 1 year lease & renew or then go periodic.
I guess we shouldn’t be surprised but this seems to be going against the general intention of government to give tenants more long term security.

 

I'm sure longer durations exist but I have never met anyone on a lease longer than 1 year, or a PM willing to entertain the idea. In other words, 1 year renewable is the norm.

For every tenant that supposedly wants a multi year lease, there are probably just as many who prefer periodic.

My own experience renting (and what I've seen on these forums) is that's its landlords who push for fixed term leases over periodic rather than tenants.
Of course, there are always the exceptions but that is my observation of the norm.

 

The reasoning behind the break fee tapering away was to encourage long term leases to be set for tenancy security. eg If 6 months remains then negotiate a new 2 year lease etc. Although with COVID and potential over supply in some areas this may be something you dont want to be discussing early....now. Just one more reason why a good PM will be needed.

Mel - Do these new rules apply to existing leases which may indicate different t&cs ?

 

Sorry for jumping in, but the new rules only apply to leases which commenced on or after 23 March 2020.

 

Interesting, i hadnt thought of that.

This said....you then have the cost of a new lease being signed every 6 months

 

Yep that.

Unless the PM used an old version (quite possible), however there would probably be a case to be argued since that's the date the legislation came in.

Old leases should have the 6 weeks in the first half and 4 weeks break fee in the 2nd half. Older leases will have 'pay till a new tenant is found and leasing costs'.

 

If I was formulating and implementing residential tenancy laws, I'd bring this back so quick. Fully covers the owner for losses suffered because of a tenant breaking the lease.

 

Paying the leasing costs is fair enough. No question.

The problem with having to pay until a new tenant is found is the complete lack of transparency.
Or in other words, what real incentive is there for a landlord to lift a finger in finding a new tenant if the rent is coming in regardless.
I'm sure if I was wanting to break a lease I could find someone to take my place, but you might not agree to take them on. Now what?

I think there needs to be a balance between stability and flexibility. The needle can't realistically be pegged to one or the other.

 

The legislation back then imposed an obligation on the owner to mitigate the tenant's loss during the break lease scenario. If an owner unreasonably rejected a suitable tenancy application then the owner would be found out either by way of complaint to NSW Fair Trading or the tenant taking action at the Tribunal.

The onus of proof rests with the owner/agent to prove that they have made every effort to re-let the property.

 

I would agree with this in principle, but in practice most lessors and real estate agents were terrible at properly doing the relevant calculations for fixed costs, and also often were not great at properly mitigating their loss during the vacant period.

Yes there was a right to dispute it of course, but it just created more matters that needed adjudication for the tribunal.

 

The problem with an onus to mitigate is that it is as flimsy as best endeavours and where possible etc.
The bigger problem is that although onus of proof may rest with the owner/PM, the burden of taking action in a tribunal (subjective itself) lies with the tennant.

I suspect if the system worked on the first place it wouldnt have needed to change. Sure it might have worked more favorably for a landlord/PM, but that doesnt mean it worked.

At least the formula of x penatly for x period of lease break provides a predetermined outcome known in advance by all parties.

 

Thank you for your reply. You make a good point, I would rather have a couple of weeks vacant property for viewing and sprucing the place up for the next tenants. It feels pretty skewed to the tenants at the moment tbh but I guess that is part of the risk of renting out.