Tenant Breaking Lease - Need Advice

Discussion in 'Property Management' started by Reinvestment, 13th Sep, 2019 at 3:00 PM.

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  1. Reinvestment

    Reinvestment New Member

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    Hey guys, I've been a viewer of these forums for quite some time but now I require some individual advice.

    I bought a property (VIC) back in March with the property rented back to the previous owner on a 12 month lease as is. This worked out well for me, as the house would definitely need some renovations for any new tenant. So I thought the delay in renovations for at least 12 months would help with my cash flow for the time being.

    Unfortunately, I've recently been advised that the tenant wishes to break the lease on the grounds of hardship with just under 21 days notice provided. The tenant has agreed to leave a extra weeks rent as compensation. I feel like this is not enough as I stand to lose quite a lot of money as a result. The PM has told me to proceed with that offer, as well as advising me that I may be able to claim further compensation, only if the property is listed straight away and no renovations are completed. However, I feel like the property will need some minimum renovations for the next tenant.

    The renovations will not take more than a week. Is it possible to still claim rent until the new tenant moves in and still undertake renovations (for e.g. removal of carpet, installation of new kitchen appliance etc)? Or any other form of compensation? Any sort of advice on how to reduce my costs in such a situation will be greatly appreciated.

    Thanks so much for your help!
     
  2. Trainee

    Trainee Well-Known Member

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    Why? How are you calculating the loss?

    Why do you think this? Is it just that you dont think its nice? Not nice places can still be rented.

    Probably not, because it wont be available for rent.

    Not sure what the issue is. You were planning to do renovations from day one. Youve just delayed this by 6 months instead of 12. How were you going to 'reduce' your costs if youd had to do renos when you first bought it?
     
  3. Shazz@

    [email protected] Well-Known Member

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    I think by law, you have to re-lease the property as quick as possible to ensure that ex-tenant does not have to continue paying rent. If the reno's will take no longer than a week, why don't you still advertise your property and continue with the open homes, while the reno's take place?
     
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  4. Dan Wood

    Dan Wood Well-Known Member

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    This, list and state property available after X date.
     
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  5. Stoffo

    Stoffo Well-Known Member

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    Schedule the works req'd and advertise with available immediately. (or the ex tenant might complain) !
    Just schedule the first open/inspection the following week/weekend :p

    @Trainee the "loss" as such is the fact that the previous owner and now tenant signed a 12 month lease, and are now terminating a few months later, so the remaining term/$$s just evaporated :eek:

    Surely they can't be claiming "hardship" after receiving the income from the sale o_O
    Clearly they've found and bought elsewhere :mad:
     
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  6. TMNT

    TMNT Well-Known Member

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    other than whats stiuplated by law, the law is the law,
    hardship, yes ive been the "victim" of legislation, I think it its a stupid rule, eg, I cant get out of my mortage repayments, based on hardship, but a tenant can claim hardship and leave the landord out pocket, which has nothing to do with them

    Best, just to deal with it and understand their and your legal rights, and move on ,and minimise the implcations for you

    Being a landlord, in tough times, getting 21 days notice within the lease will be the least of your problems
     
  7. Michael Mitchell

    Michael Mitchell Well-Known Member

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    Sounds like you're not willing to just let them out of the lease, so proceed with standard break lease procedure, that is, they vacate and hand back the keys and complete their obligations so far as returning the property in the same condition they received it less fair wear & tear, they pay rent to the day the vacate, they pay any water usage owing etc, you do not process the bond refund until such time as it's been relet or the lease expires, whichever is sooner, to then justify a claim for compensation of rent against the bond. The compensation of rent and other break fee costs you'll claim against the tenant for things such as advertising, smoke alarm compliance, etc, will probably exceed the bond held, however that's the avenue you use to begin your compensation claim - a bond claim which will end up in VCAT and turn into a greater compensation claim for yourself, the Tenant will counter claim playing the hardship card and it will be up to the tribunal to judge their situation on its merits and determine what they owe. If you are left short changed then you make a claim with your landlord insurer. Be sure to use any bond monies towards items your insurance policy will not cover. Nb. your insurance claim can be lodged as soon as they vacate the property and return it to you, this will assist you with cashflow, you may then also win money for the same thing at VCAT, depending on your policy, you're probably obligated to recomp the insurer but whether they actually check this stuff is unlikely and up to you, just know in the future there's a chance someone could come knocking for it.
     
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  8. Dan Wood

    Dan Wood Well-Known Member

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    You're kidding right? Wildest assumption ever.
     
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  9. Ted Varrick

    Ted Varrick Well-Known Member

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    Maybe, maybe not, what's your wild assumption Dan?
     
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  10. Dan Wood

    Dan Wood Well-Known Member

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    I don't have one, I just find it stupid that you assume someone's financial status just because they sold a property.

    That means jack all.
     
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  11. Stoffo

    Stoffo Well-Known Member

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    True, maybe they got tired of waiting for Capital Growth, so sold and went and put it all on Black :D

    Maybe they gave all the proceeds to their children, maybe they are sick even :oops:
    There is likely more to the story that hasn't been disclosed.

    So why would you rent back the property after sale if you couldn't afford it for more than a few weeks ????

    My assumption was made on the basis that unless they are moving into Government housing (for which you can terminate a lease far sooner) they appear to have used the landlord o_O
     
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  12. Michelle Evans

    Michelle Evans Well-Known Member

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    For Victoria, standard lease break requires the owner do everything in their power to 'mitigate loss' to the tenant - if they don't do that, the tenant can be released from further obligation.

    If it was the vendor 'leasing' the property after the sale, you might want to double check that this wasn't actually part of the sales contract - if it was then you could be in a pickle because a licence to occupy isn't covered by the residential tenancy act but of course, after settlement they can lease a property - it can get messy. Better to check that one with the legal eagles though.

    Anyway, assuming it is a standard lease agreement with a bond, you need to try and rent it out as soon as you can and if you're advertising at a higher price than what they're paying, you might also be seen as 'not mitigating their loss'. One week's compensation is a bit steep however, I'd go back with asking for 28 days which is a standard notice period when not on a fixed lease (be seen to be trying to help as much as you can). Get it leased as soon as you can - only then will you know your 'loss'. Say it takes 4 weeks to lease, then you can try and claim that plus a pro-rata of the letting fees / advertising.

    Try to negotiate because you bought the house with them in there - so any entry condition report done would represent the property the way it was when you bought it - so be prepared for receiving it in that condition (possibly not even clean).

    If it goes to VCAT, for the highest chance of success, try and attend the hearing - explain your hardship (how you'd used this agreement to make the property leaseable and you're 6 months rent short, how hard you tried to lease it quickly to minimise their loss, all the extra elbow grease you had to put in to lease it quicker - knowing there was little you could claim given they were in there when you bought it thinking you'd have a secure tenancy and so on)

    Good luck.
     
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