Reasonable time to re-let

Current situation is that we are breaking our 24 month lease, ~21.5 months in ie 2.5 months left. We know we are liable for the pro-rata amount of the advertising, re-letting fees etc and rental loss. We provided the property manager with 77 days notice.

The reason we are breaking the lease, is that we have purchased, ironically through the same agent. The rental property is located in VIC in Melbourne metro (North Balwyn)

The property was advertised from July 15th at the current rental and after 4 inspections there have been 4 attendees with no applications. My questions specifically relate to rental loss

• Understand that the LL/REA have to mitigate the loss, associated with the lease break, however does the compensation amount include rental amount being paid for until the end of the current lease (early Nov 19) if there is no tenant found?
• The market, in my view, is softer than what is was when we signed the lease. So if a new renter is found, but is paying less than the existing lease amount, is this included in the compensation amount claimed for by the LL from the duration between the new tenant lease commences and the end of my lease?
• After our vacate date being August 19th, the REA has indicated that we are still liable to pay rent in line with our agreement until the new tenant is found. I have conflicting advice that says that we pay rent up until August 19th and depending on the new lease commencement, the amount is then part of the LL claim. The other is that we continue to pay rent as per normal until the new lease. I also note there is a direct debit arrangement for the payment of rent.
• In everyone's opinion, after what period of time / number of inspections, does the lack of applications indicate that the LL/REA have to re-adjust their rental expectations which feeds into their obligation to mitigate the loss
• It is my opinion, that the current market rent we are paying is ~$50pw above what the market is which may be contributing to the lack of response.

Your considered comments are appreciated.

 

Rules vary on this a little in each state. So here is some SA info to get you started:

- PM here doesnt have to start advertising til you give keys back
- After 4 inspections with not many applications, would definitely be reviewing rent (whether a break lease situation or not)
- your rent liability is calculated to the start date of the new persons lease
- if rent achieved is less than what you were paying, then the difference is calculated into the above as well
- PM / LL definitely needs to be putting best effort into marketing and showing property (whether break lease or not)

 

Thanks DT and appreciate the state variations in this space.

I note regarding the rent liability, I was told anecdotally by a PM that I know quite well, that when they went to VCAT recently, claiming an amount for compensation as part of a lease break. The member had indicated to them, that is was unreasonable to claim more than 4 weeks of rental liability. That is from the date of advertising, the LL has 4 weeks to find a tenant, even though in that case, the new tenant's lease started 7 weeks after they first advertised. I didn't get a chance to understand if there were any mitigating circumstances although i will touch base again to find out.

 

Ask @Lil Skater if it's in Victoria, shes the gun there.

There's no 4 week limit here. However long it takes. I've successfully won a tribunal case with a couple of months taken - but i provided evidence of opens times, how many attended each of them, why applications weren't acceptable, the dates of our rent reductions.

 

From Victoria - there isn't a specified limit. Lease break is supposed to be until someone else takes over the lease or the lease ends, whichever comes first.

In reality however, if the agent isn't seen to be doing their best to minimise loss to the tenant, then the likelihood is they won't be able to claim a full amount. I've seen it be awarded 28 days after you've returned the keys, and I've also seen nothing awarded beyond the date of key return / possession being given to the landlord.

VCAT members take into account hardship as well - someone moving into mum and dads house because they were made redundant or had an accident and can not afford the rent is suffering hardship- unlikely to win much in that instance. Someone who has made the conscious decision to buy a property whilst in a lease may or may not be awarded the same consideration.

It really depends on the member and how everything is being handled. Sorry there isn't much of a set precedence / figure for you to calculate. But - if they're not looking to review the rent, conduct opens (potentially midweek opens), then you have a better chance of not having to pay the full amount out.

 

Totally agree with Michelle here.

There's no specific limit, but the REA does have to mitigate the tenants loss. Which would generally also include bringing the property in line with market and may see you pay the difference between the costs. Ie. $50 per week for the remaining 2.5 months.

However VCAT can look at this quite differently. It does also depend on whether it's a lease renewal or not, if it's a lease renewal some VCAT members will only award the cost of the lease renewal and not the original letting fees.

 

Thanks for the responses everyone, that is most helpful. Understand there are a few moving parts here. Any thoughts on the following aspect?

After our vacate date being August 19th, the REA has indicated that we are still liable to pay rent in line with our agreement until the new tenant is found.

I have conflicting advice that says that we pay rent up until August 19th and depending on the new lease commencement, the amount is then part of the LL claim. The other is that we continue to pay rent as per normal until the new lease.

I also note there is a direct debit arrangement for the payment of rent. Thanks again.

 

If this is a concern, go to your bank and cancel the direct debit. Don’t be fobbed off, the bank CAN cancel it.

This won’t alter your obligations.

If you feel the re-letting is taking too long, you can appeal to VCAT to terminate your liability.
Marg

 

Great advice given here- they are required to mitigate your loss and if you can successfully argue that they have failed to do then it is likely you will be released from your remaining lease obligations.

I think having four viewings without a single attendee without some sort of an adjustment or response, most likely due to the property being severely over-priced, would be quite strong grounds.

If I were you- I'd put in writing that you are willing to accept the additional financial costs of a significant rent reduction to market price (e.g. $50wk x 10wks = $500) and even that you'd be happy to personally show the house to prospective applicants if the PM is unavailable. The more you can do to show you have been exceptionally accommodating, the less argument they might have if it comes to a tribunal hearing. Of course your efforts may even help find a replacement tenant!

 

Thanks @Marg4000 & @Tom Rivera for the advice.

Acknowledge the advice regarding offer to pay any rent differential as an offer of good faith. If I was confident that there was good will coming the other way, it might be something that I would genuinely offer. Of course, we could still land on something like this in due course.

After having another inspection cancelled at the start of the week, presumably there wasn't any-one confirmed to attend, I emailed them summarising what they have told me regarding attendance at OFI's so far, referenced 3 existing & comparable rentals in the same suburb which were $795-$875 and asking them that they need to reduce the rent to meet the market. I haven't received any response.

They had initially refused to cancel the direct debit and once I indicated that the bank will be blocking, they relented.

They had also initially sought signature of what they called a lease assignment with some additional clauses and obligations as mandatory prior to advertising. I called them out, refused and they relented.

I know they represent the best interests of the landlord but their behaviour is a stark reminder that even the biggest REA brands are not immune from what I consider dubious and counter-productive behaviours.

I am gearing up for what seems, as at today, an inevitable VCAT hearing.

 

1st argument - because the lease is so near the end (comparative to the term), you shouldn't have to pay the Lessor compensation for the re-letting costs because they'd be having to incur it anyway

2nd argument - if you believe the market is softer and the Lessor/Agent is not acknowledging this thus sabotaging their ability to re-let the property and mitigate your loss, obtain rental appraisals/comparative market analyses from 3 other local well known agencies for the property; assuming the material supports your position, if the Lessor/Agent hasn't re-let the place then that may speak volumes

 

This is technically the correct answer. You are in effect ending the fixed term tenancy early. Post that point it becomes a compensation claim.

- Luke