QLD P.M. says that the rent cannot be increased when advertising after break lease

You're asking how long is considered a reasonable time to relet right? It used to be a month, though with the tight market I wonder if they'd expect faster results these days?

 

Hey all, Apologies for bumping this thread.

My tennant wants to break lease. The Re has advised the break lease is 1 week rent (seems odd though I live in Vic)

The REA has advised I should let them break the lease so that the rent can be increased for perspective renters. Here is their email, can someone dumb this down for me?

Code:

ith the new legislation it gets very tricky when tenants want to break their lease.


When a tenant expresses interest to break their lease they pay all the cost involved, that under a normal new tenancy the owner would pay.


When they pay us the advertising and one weeks rent as the letting fee we advertise the property on their behalf, at the current rent, and then process the applications.  Once an applicant has been approved by the owner, we do up the documents, obtain a bond and 2 weeks rent from the new tenant, advise the outgoing tenant that we have leased the property and at this stage we advise them of their obligations to pay the rent up until the day before the new tenant moves in so as not to have any financial disadvantage to the owner.


However, as per the new legislation, we have now entered  into a new lease and the rent remains the same for a minimum of 12 months.  As you can see this is very disadvantageous to the owner as he has now been locked into the same rent for a 2 year period.


However if the owner chooses to release the break of lease tenant from their obligations under the lease agreement – eg rent until we find another tenant, the first weeks rent as a letting fee and the advertising, then we can advertise the property for an amount that you decide.   

 

It looks like they're claiming a bunch of things about the law that I suspect is very wrong. What state is your property in?

 

Is this this part you are confused by?:
When they pay us the advertising and one weeks rent as the letting fee.....

The one week rent is the letting fee, not a break fee.

Your agent is basically saying the tenant has obligations when breaking the lease, however it may be advantageous to you (both of you) to simply release them and re-let the property at a new higher rent.

This is where NSW has the matter sorted. There is complete transparency with lease breaks over who pays what, under what conditions, and when.

 

Its on the Gold Coast/Queensland.

I am confused by the fact they are saying if I don't let them break lease then I can't increase the rent on the next tenant for 12 months.

My thread with them is longer, this email is a forward from my REA manager/owner of the Agency.

 

There have been a bunch of proposed changes in this area across one or two states. It's not relevant to me so I don't really follow it.

It sounds like your landlord is suggesting it might be in your interest to just let them walk so you can re-let at a higher rate.

 

Their explanation is awkwardly worded, but I understand what they're trying to say. Hypothetically you have a tenant paying $500.00wk who is, say, 9 months into a 12 month lease, and they break lease. When you secure a replacement tenant, as with the original tenant, the rent that you offer the property to them must remain the same for 12 months. If you happened to ask the same rent across both leases, you would've effectively have been stuck with the same rent for 21-22 months.

This leads into the key issue with your PM's understanding here, a very common misconception. In short- The rent does NOT need to remain the same when readvertising for a break lease. For example, if market rent has improved appreciably between the lease was signed and then broken, there's no reason you cannot revert your ask to the new market rent. HOWEVER, you do have a legal obligation to mitigate the tenants loss, so if your ask is unreasonable this can be considered a failure to meet those obligations.

 

We broke lease and the lessor increased rent by 20%. We requested the profits from increased rent be offset against the rent payable by us (the compensation we are supposed to pay while the property is vacant between tenants). The lessor took it all the way to QCAT, where we maintained the offset stance. The adjudicator told us "it doesn't work like that" and "that argument isn't supported by legislation". But I've heard other tenants say they were successful with that argument. It feels like it all balances on the experience and whim of an adjudicator.

 

I think at the end of the day it balances on the decision of the individual adjudicator, and if they feel the steps taken were reasonable enough to limit vacancy time between tenants. We were on the tenants side of things and the lessor had the property vacant for two weeks before a new tenant started (which I think is normally reasonable), but the adjudicator said that with a housing crisis, and with the amount of notice we provided that two weeks vacant was seemed like a long time. The adjudicator felt that if the rent had been advertised without the increase it would have been possible to get a tenant in sooner. The lessor argued they leave one week to get the property ready between tenants and so that's all they were awarded. There really doesn't seem to be too much consistency about what is reasonable at qcat

 

Was this part of an actual decision? Sound more like comments made at a preliminary hearing rather than a judgment.

But if your case actually did have that as part of the material ruling, I suspect its appealable on an error of law. Might not be worth it in this case, but the law is fairly clear.

 

I made the offset argument in the documented response submission and at the oral hearing. The adjudicator really wouldn't have a bar of it, and the lessors profits didn't offset the amount payable by us in the final ruling. Apparently the law doesn't exist beyond the residential tenancies act? Maybe the adjudicator was inexperienced, or in a bad mood? Definitely not worth appealing in this case.

 

I see. Bit of a shame, and I guess its not unheard of for tribunal members to get it wrong.

Odd comment they made about the legislation - break lease liability is almost exclusively a common law rule anyway.

For someone in your situation in the future, I would recommend bringing case law as part of the submissions. For example -

Donaldson v Turbill [2022] SACAT 103 - Donaldson v Turbill [2022] SACAT 103 - BarNet Jade

 

This is awesome! Thanks. I noticed this was at SACAT, my limited understanding is that south Australia has more specific rules about what a lessor must do with profits from a break lease, but it doesn't

Thank you so much. Makes me feel a little less stupid.

Also just wanting to pick your brain a little further: it seems like south Australia has explicit rules about what must happen in the event that a lessor profits from a break lease, but these

This is super helpful, makes me feel a less silly.

Sorry, i just want to pick your brain a little further: I noticed the Donaldson v Turbill case was in SA, and it looks like SA has clearer expectations surrounding rental profit from a break lease I.e. it is specified on SA government website that lessors should offset rental profits against rent payable by the break lease tenant. Qld doesn't look have this specified anywhere (not even on their tenants advocacy sites). Am I wrong in thinking there could be varying cultures from state to state about when certain rules and principles apply?

 

Sort of wrong. SA doesn't have any special legislation or any other reason why break lease liability would be calculated differently. It's a common law rule like I said (laws that come from cases rather than legislation). No other state has any legislation that changes how break lease liability is calculated either*, so the common law from SA should (and effectively is) good law in every other state.

The SA case is just an example I quickly looked up - I imagine there's case law examples in other states too if you want to look for it.

The "culture" you refer to might just be how well known the law is, so to that extent you might be right. But it doesn't change what the law is.

*Only caveat to this is set break lease fees in some states.

 

Really appreciate your time and I hope this comes useful for the next person in my situation