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Tennant breaking lease - penalty

Discussion in 'Property Management' started by giraffez, 7th Sep, 2016.

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  1. giraffez

    giraffez Member

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    When a tennant breaks a lease, is my understanding correct that in nsw they must pay rent until you find a new tennant by default, unless you specify the optional break lease in your contract in which they must pay 4-6 weeks of rent regardless and the pay rent until new tennant is found doesn't apply anymore.

    The pay rent until new tennant is found doesn't seem to be specified in the RTA clauses so how does it take effect?
     
  2. thatbum

    thatbum Well-Known Member

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    Its not in any legislation - its the common law of contract.

    "How long does it take effect?" is an unusual question - the short answer might be "until you find a replacement tenant". But there's a whole lot of conditions and caveats on what can be claimed, depending on the situation.
     
  3. giraffez

    giraffez Member

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    Thanks so by crossing out the break fee option will automatically invoke this option of pay rent till new tennant is found ?
     
  4. SeafordSunshine

    SeafordSunshine Well-Known Member

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    Perhaps another way of saying what Thatbum said,
    is that you need to advertise the property and show potential suitable tenants through to minimise your loss?
    Its not that you are allowed to 'do nothing' ?
     
  5. giraffez

    giraffez Member

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    I know where the confusion is. My question was "How does it take effect" referring to the fact the condition isn't specified in the tennancy agreement clauses. Thatbum interpreted my question as "How long does it take effect" which is not what I'm asking.
     
  6. thatbum

    thatbum Well-Known Member

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    Without the break lease fee option, default rules for break lease situations apply - which I suppose can be described in short as "pay rent till new tenant is found". There's quite a few caveats to that though, which is why it is such an advantage for the fee option to have that certainty.

    Ah ok - my mistake. I think I answered your question anyway though - common law of contract.
     
  7. Coconutwheels

    Coconutwheels Well-Known Member

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    I've had the same issue recently, I explained to the agent that my understanding is you simply cross it out and the "pay rent until new tenant found" automatically applies. They disagreed and said they need to replace the clause with that. I didn't know my stuff well enough to argue it, they will replace it with another clause that is "pay rent until new tenant found, plus 1 weeks rent".
     
  8. giraffez

    giraffez Member

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    Okay thank you both, will the tenants dispute the extra week of rent since they are already paying rent up to the day when you find a new tenant. ? I suggested something similar and My agent is of the view that they will view this as me being unreasonable.
     
  9. Scott No Mates

    Scott No Mates Well-Known Member

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    Yes, it's not in accordance with the act. The agent has to get the tenant to sign an agency agreement (to claim the letting fee and advertising and lease preparation costs) so it doesn’t come from your pocket and the agent is working for the tenant to find a replacement.
     
  10. thatbum

    thatbum Well-Known Member

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    You can't just add whatever clause you like. Something like that would be void for attempting to contract out of the legislation - and probably be doing you a big disservice by getting the tribunal offside immediately if you ever needed to go there for break lease issues. Theoretically, you and the PM could also be fined because it is an offence to try and contract out of the legislation (although I couldn't ever see it happening in practice).

    Not sure where your PM is coming from there.
     
  11. thatbum

    thatbum Well-Known Member

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    Your PM did you a favour - see my post above.
     
  12. Coconutwheels

    Coconutwheels Well-Known Member

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    This was the clause the agent suggested to include, I assumed the 1 weeks extra was to cover the leasing fee etc. This property is in regional area where re-letting can sometimes take a while. What do others do in their lease agreements?

    BREAK LEASE:


    Please be aware of Item 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 lease fee of the following amount: 1 weeks rent + GST, rent up until this agreement expires or until a new lease is signed.
     
  13. thatbum

    thatbum Well-Known Member

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    Leave the lease silent on the issue of break lease liability.
     
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  14. Scott No Mates

    Scott No Mates Well-Known Member

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    As per my previous post, the letting fee is paid by the tenant to an agent (they aren't required to go to the same agent as you have used). This is subject to a separate letting agreement between the agent and the tenant.
     
  15. giraffez

    giraffez Member

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    I called the dept of fair trading today and they advised me to do the same... ie do what cocunut wheel said. Put the clause in the contract. I don't know about the +1 week extra rent but they referred me to the first two points on their website in the costs you may have to pay section.

    Breaking_a_lease_early
     
  16. thatbum

    thatbum Well-Known Member

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    No that's not really how it works - there's no need for a separate agreement between the agent and the tenant, and the fee isn't being paid to the agent - its to the landlord.
     
  17. thatbum

    thatbum Well-Known Member

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    Well you got bad advice from them. You probably spoke to one of their call centre workers, who I imagine are not legally trained or supervised.

    Their own website contradicts what your 'advice' was. Basically in NSW, you either use the optional 4 or 6 week set break lease fee - or you use the default rules for break lease.

    Trying to draft your own break lease fee clause is redundant in the best case scenario, or in worst case scenarios it is unlawful contracting out of the RTA, and/or selling yourself short on what you can claim anyway.

    I don't know how many times I need to repeat myself - if you want to use the default break lease laws, then all you have to do is do nothing.
     
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  18. Scott No Mates

    Scott No Mates Well-Known Member

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    @thatbum - AFAIK it is the tenant who seeks to break the lease. It is then up to the tenant to engage an agent of their choice or may do it themselves too, to relet the property. The tenant is up for the cost and it can only be recouped (if an agent) by having an agency agreement with the tenant, it cannot be recouped from the owner. The owner isn't going to pay the agent as they have already paid the agent to find the existing tenant.

    The do nothing is the best course of action if there isn't a break fee but it is then up to the tenant to find a replacement to the satisfaction of the owner.
     
  19. thatbum

    thatbum Well-Known Member

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    @Scott No Mates - the legal workings are quite different from what you describe.

    The tenant does seek to break the lease. Contrary to popular belief, they don't need the permission of the landlord to do so - the landlord can't really do anything about it actually, apart from claim damages arising from the breach of contract (the breach being the failure to pay rent after the vacate date).

    The "agency fees" you describe are definitely born by the landlord at first instance - after all, the landlord is the one using the PM services to find a replacement tenant. The landlord is then generally able to recover a portion of the agency fees from the tenant, because the landlord has incurred these costs earlier than he/she would have than if the fixed term of the tenancy had been born out. This is the same for other fixed costs of finding a replacement tenant, such as advertising fees, final inspection costs etc.

    The apportionment is generally equal to the percentage of the time left on the original fixed term lease when the costs are incurred by the landlord (generally when the replacement tenant starts their tenancy).

    There is no contract between the tenant and the agent for the above.