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Ending a tenancy in the ACT is subject to detailed regulation by the Residential Tenancies Act 1997.
A tenant who breaks a tenancy agreement before the end of its term could face substantial liability.
Tenants need to know both their rights and their responsibilities
TENANCY TIPS:
Ending a Tenancy and Breaking a Lease
** last updated: 13/06/07 **
Download a .pdf version of this tipsheet
Your tenancy is regulated by the Residential Tenancies Act 1997 (‘RTA’). The terms of your tenancy agreement are set out in the RTA, and are known as the Standard Terms – they are often provided as your lease or ‘tenancy agreement’.
A tenancy may only be terminated in accordance with the RTA. Section 36 of the RTA lists the various circumstances in which a tenancy may be terminated.
TERMINATION BY MUTUAL AGREEMENT
A tenancy may be terminated at any time by mutual agreement, that is: where the tenant and the landlord agree together to end the tenancy.
The agreement must be set out clearly in writing (signed by both parties, specifying the date when all liabilities end), and the tenant must vacate on the agreed date, for the mutual termination to be valid (RTA s 36(g)).
TERMINATION BY THE LANDLORD
A landlord, or their agent, may only terminate a tenancy agreement in accordance with the provisions of the RTA. In particular, the landlord must have one of the lawful grounds for termination, and must obtain an order for possession from the Residential Tenancies Tribunal (RTT) if the tenant does not move out.
For details on termination by a landlord see our leaflet Tenancy Tips ‑ Eviction.
TERMINATION IF THE PREMISES ARE NOT FIT FOR HABITATION
Under clause 86 of the Standard Terms either party may give written notice to terminate the tenancy if the premises become unfit for habitation, or are not available due to government action. The tenant must give 2 days notice, and the landlord at least 1 week (cl 87).
Rent is not payable from the date the premises become uninhabitable. If neither party chooses to terminate the tenancy, rent is not payable during the period from when the property becomes uninhabitable to when the property is able to be used again.
If there is a dispute as to whether the premises are uninhabitable either party may seek an order from the RTT declaring the premises to be uninhabitable.
Termination by THE Tenant
Some common misconceptions
The following misconceptions may turn out to have expensive consequences. Don’t be a statistic — thoroughly research your rights!
I can terminate a fixed term tenancy agreement by giving four weeks' notice to the landlord.
False!
If I find someone else to move into the house after I leave, my problems are over.
False!
As long as I keep paying my share of the rent, it doesn't matter if my co‑tenant gets behind or walks out.
False!
In each of these circumstances, the tenant has an ongoing legal responsibility which in the worst cases may cost thousands of dollars.
Fixed term or periodic tenancy?
Except where there has been a breach of the tenancy agreement, a tenant's legal position in relation to termination of a tenancy is dependent upon whether the tenancy is periodic or in a fixed term.
A fixed term tenancy is one where the tenancy agreement states that the tenancy commences on a certain date and continues for a specified period, usually 6 months or 12 months, and expires on a certain date. At the end of the fixed term (unless both parties choose to sign a new fixed term tenancy agreement) the tenancy automatically becomes a periodic tenancy. A periodic tenancy agreement may also exist where the parties create a tenancy but don’t specify a fixed term.
Generally, the most difficult problems arise when a tenant or tenants require an early termination of a fixed term tenancy.
Terminating a Periodic Tenancy
Under the Standard Terms (cl 88) a tenant may terminate a periodic tenancy agreement by giving written notice of intention to vacate to the landlord or agent (always keep a copy). The notice period must be at least 3 weeks.
If you vacate without notice during a periodic tenancy, you will be liable for 3 weeks’ rent in lieu of notice (RTA s 63), but not for any of the costs involved in reletting the premises.
Terminating a Fixed Term Tenancy
At the end of the fixed term
If a tenant wishes to end the tenancy at or after the end of the fixed term, they are able to do so by giving 3 weeks notice in writing (cl 89).
NOTE: a landlord cannot terminate the tenancy in this way - they must have grounds (see “Tenancy Tips: Eviction”).
During the fixed term
The tenant can terminate the tenancy agreement during the fixed term with or without grounds.
TERMINATING A FIXED TERM TENANCY WITH GROUNDS
If the tenant has a reason — that corresponds with one of the grounds for termination prescribed by the RTA — they can make an application to the RTT to have the tenancy agreement terminated.
Grounds for Termination
The RTA provides several grounds upon which a tenant can terminate a tenancy agreement.
A tenant may terminate his/her tenancy agreement in any of the following situations:
· Where there has been a serious breach of the tenancy agreement by the landlord (s 43);
· Where the premises have become uninhabitable (cl 86: see previous page);
· Where the tenant would suffer significant hardship if the agreement were to continue (s 44);
· Where the landlord has caused or threatened damage or injury (s 45);
· Where the tenancy agreement was induced by a false or misleading statement (s 46); or
· the tenant is being posted away from Canberra and there is an additional clause in the lease providing this ground (s 8).
Termination where the Landlord has breached the Tenancy Agreement
A tenant has a right to claim compensation for any breach of the tenancy agreement by the landlord. In certain circumstances the tenant may also elect to terminate the tenancy if the breach is serious enough. The breach must be fundamental to the tenancy agreement.
The Standard Terms (cl 90) provide two options for termination if the landlord has breached the tenancy agreement.
1. An RTT Order Terminating the Tenancy
The tenant may make an application under RTA s 43. If the RTT agrees that the breach justifies termination, it may order that the tenancy will terminate with 2 weeks notice. This period may be waived if the RTT is convinced that the tenant would suffer significant hardship unless the agreement terminated immediately.
2. Tenant’s Notice of Intention to Vacate
The RTA sets out the following procedures in the Standard Terms (cl 91):
a) The tenant must give the landlord written notice that the landlord has 14 days to remedy the breach if it is capable of remedy (the tenant should sign, date, and keep a copy of this notice).
b) If the landlord remedies the breach within that 14 day period, the tenancy will continue.
c) If the landlord does not remedy the breach within the time specified, or if the breach is not capable of remedy, the tenant can give 14 days notice of intention to vacate (sign, date and keep a copy).
d) The tenancy agreement then terminates on the date specified by the tenant.
e) Rent is payable to the date specified in the notice or to the date that the tenant vacates the premises, whichever is later.
f) If the landlord remedies the breach during the period of the notice of intention to vacate, the tenant may withdraw the notice or may terminate the tenancy agreement on the date specified in the notice by vacating the premises on that date.
Once the landlord has received the Notice of Intention to Vacate, cl 84 provides the landlord with two options. S/he may either:
a) Accept the notice and accept that the tenancy shall end on the date nominated in the notice; or
b) Apply to the RTT for confirmation of the tenancy agreement, an order for compensation, or both.
It is possible that a notice of intention to vacate may not protect the tenant from liability if the RTT decides the termination was not justified by the nature of the breach, or that the breach did not occur.
TERMINATING A FIXED TERM TENANCY WITHOUT GROUNDS (“Breaking the Lease”)
Seeking to terminate the tenancy agreement before the end of the fixed term without any of the grounds listed above will be, in effect, ‘breaking the lease’.
Notice
If you know you need to break the lease, you should start by giving written notice to the landlord or agent of your intention to vacate on a specified date. Once you have served this notice, providing you vacate and return the keys on or by the date you propose, your tenancy terminates on this date (cl 84). This brings to an end your ongoing liability to pay rent and care for the premises, however you may still be liable for compensation, as follows.
Compensation
Where a tenant terminates a fixed term early, the landlord is entitled to compensation for losses incurred as a result of the early termination. What the law seeks to do here is to ensure that the landlord doesn’t suffer financially as a result of the termination.
Under RTA s 107 the landlord is lawfully entitled to compensation for:
· The loss of the rent that the landlord would otherwise have received until a new tenant is found; and
· The reasonable costs involved in reletting the premises (e.g. advertising, reimbursement of legitimate agent's costs).
Note, however, that the landlord’s ability to recover compensation in these cases is limited in several ways.
First, the compensation the RTT may award for loss of rent is limited to 25 weeks rent, or the number of weeks until the agreement was to end anyway, whichever is less.
Second, the compensation in relation to reletting costs are limited to the equivalent of one week’s rent. This is the limit, there is no option to add on GST or advertising costs.
Finally, RTA s 38 provides that any party to a tenancy agreement seeking compensation has a general duty to mitigate (reduce or avoid) their losses. According to this rule, a person cannot recover compensation for a loss which could have been reasonably avoided.
This means that the landlord has to ensure that all reasonable steps are taken to find and accept a new tenant. Failure to do so may mean that the landlord is barred from recovering compensation for all or part of the loss from the tenant.
Examples to watch for are a landlord failing to advertise the premises quickly and effectively once the tenant has given notice; refusing reasonable applications; and increasing the rent they advertise the property for (where the higher price is a deterrent to prospective renters).
NB: A landlord or agent has no right to charge a reletting fee of 1 week’s rent. A landlord may, however, seek reimbursement of genuinely incurred reletting costs, and the tenant should demand an itemised account that shows how the costs were incurred. As noted above, compensation for these costs is limited to the equivalent of 1 week’s rent.
Reducing losses from breaking the lease
If an early termination is unavoidable, you can take some concrete steps to reduce your potential liability, by:
· Giving the landlord or agent as much notice as possible of the proposed date of vacation, so that efforts can be made to find new tenants;
· Cooperating with the landlord or agent in the reletting of the premises by making yourself available to show people through the property;
· Keeping the premises tidy so that they are attractive to prospective tenants;
· Introducing prospective tenants to the landlord or agent. If a co‑tenant is giving notice, finding a new co-tenant and introducing them to the landlord or agent for approval of a change of shared tenancy.
Often, cooperation along these lines can yield good results: you are able to break the tenancy agreement, and the landlord suffers little or no disruption to their rental income.
Things, however, may not always turn out for the best, particularly if the rental market is slow. In protection of your interests, tenants are well advised to keep several precautions in mind:
· Check whether the landlord or agent is making genuine efforts to relet the premises. Have they advertised the property for rent? Are they offering it to prospective tenants? What kind of advertising is happening? Are they listing it for a reasonable rent? Be sure to keep a record of any interest shown in the property that you are aware of.
· Ensure that any reasonable offer to rent the premises is accepted by the landlord or agent. Have prospective tenants been discouraged or refused on unacceptable grounds, e.g. unlawful discrimination, requests for higher rent, etc?
· Once you have vacated the premises, it is generally unwise to pay any further money to the landlord or agent, except in final settlement of the problem — in other words, once you move out, and the tenancy has terminated, stop paying rent up-front. Any payment without a guarantee that this is an end to the matter is also not advisable, as it may result in money being spent but the premises remaining empty, at the tenants' cost. Once the rental income stops, the landlord's mind usually becomes very focused on finding a new tenant. This doesn’t mean you don’t accept your liability but that you will compensate for actual losses once they are incurred, rather than anticipated losses.
· Regularly check vacant premises to see if a new tenant has moved in, or whether the premises are still on the market for letting. It isn't unknown for a landlord to take the opportunity of an early termination to do renovations, effectively taking the property off the market. In such circumstances the tenant will usually be relieved of liability (due to the s38 duty to mitigate — see previous page).
If you encounter any difficulty in ending your fixed-term tenancy or you are not sure how to end it, the safest option may be to apply to the RTT for a Termination Order. If you are considering this option, seek advice from TAS before doing so.
Some general guidelines
Negotiate with the landlord or agent to try to find a mutually agreeable solution to the problem
Cooperate with the landlord or agent in reletting the premises (still assert your rights)
Don't simply abandon the premises, this may increase your liability. Make sure you give notice.
Vacate the premises in good order, ensuring that they are clean and that the keys have been returned
Also read our Tenancy Tips leaflets - : Access and Privacy, and Bonds
This
is a summary of your rights and responsibilities.
If
you have a specific problem, you should seek more detailed advice.
The information provided is based on the current state of
tenancy law and details may change.
Tenancy
Tips © 2007 Tenants' Union ACT
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& Community Safety is gratefully acknowledged