Lease Break - Recommendations

Lgutterch on 21/04/2022 - 17:21
Last edited 22/04/2022 - 12:23 by 1 other user

Hello, hope you're well! Looking for some recommendations on how to manage a lease break.

The context:

  • We live in Melbourne, VIC
  • We moved in a house in Feb'21 for a 1 year lease agreement until Feb'22
  • In Feb'22, we extended the lease until end of September 2022
  • My partner just got a job opportunity in Europe. We had not anticipated it at all, and this is his dream job! We need to leave end of May 22 (so 4 months before our lease finishes)
  • The termination clauses on our lease exit stipulates that: (1) we have to pay rent until a new tenant comes or the lease expires in September, (2) We have to pay 2 weeks pro rata of penalty fee, (3) there is $350 of advertisement cost

I called our rental agency early April to let him know, and the agent recommended me to only send the letter 30-35 days before we intend to leave. He said that because the agency had the obligation to find a new tenant right away they would post the ad, but if it was done too early they would not find anyone because people look to move in very quickly.

I sent the letter on Monday 19-April. It's been 3 working days since and the ad is not posted.

I called the agent earlier today and he told me the reason it is not posted yet is because the landlords were discussing the lease term with him. Apparently, they are thinking about coming back to the house end of this year or early next year, hence they would be likely to take a short term lease.

The concerns that I have are:

1) Our house is unfurnished. It seems unlikely to me that tenants would be interested to live in a house unfurnished for a short period of time
2) Is it normal that the ad isn't posted yet?
3) Our monthly rent is $3,800… Our maximum penalty fee could be as high as $17K which is massive! I understand that we signed a lease with constrains, we had not anticipated we would go to Europe. What can we do to mitigate this, are there examples where agreements are reached with the landlords?

Many thanks

Home & Garden

Comments

  • tsunamisurfer on 21/04/2022 - 17:36
    -2

    I sent the letter on Monday 19-April. It's been 3 working days since and the add is not posted.

    The agent and the landlord don't work to your schedule. They can take reasonable steps to find a suitable tenant.

    1) Our house is unfurnished. It seems unlikely to me that tenants would be interested to live in a house unfurnished for a short period of time

    What you think is irrelevant.

    2) Is it normal that the add isn't posted yet?

    Did you expect them to sit there with their finger on the Domain button waiting for you?

    3) Our monthly rent is $3,800… Our maximum penalty fee could be as high as $17K which is massive!

    You chose to leave, the landlord is the one doing the right thing by sticking to the agreement.

    • HelpMeiCantSee on 22/04/2022 - 14:33
      +1

      Not sure why all the negs. You make valid points. I would also add that waiting because the rea said so was a bit odd. More time is better.

  • gutterch on 21/04/2022 - 17:41
    +7

    Thanks for your reply! My understanding is that in this scenario, the landlord must take all reasonable steps to mitigate the loss (so trying to find a replacement as soon as possible).
    I'm just trying to understand what this means in practice

    • mbck on 21/04/2022 - 17:55
      +1

      Reasonable is not a promise. That means you may be liable for the whole term, or you may not.

      No one here will tell you exactly what needs/ will happen.

      If the agent put up an ad and tell you no one answered because it's not the time for people to look for rent, well they've done all they can.

      If however they literally did nothing, then you may have a case….

    • AndyC1 on 21/04/2022 - 17:56

      Reasonable is determined by who??? IMHO the tribunal or judges if it gets to that stage, which is where it will end up after reading the initial post and follow-up posts.

    • freefall101 on 21/04/2022 - 17:58
      +5

      3 days is nothing. You sent it Monday, no one was at work that day. Tuesday, rental agency forwards notice to landlord. Landlord spends a day thinking about how they might want to move back in and conditions around it, calls back rental agent today to talk about the options on a short term lease vs long term, go back to thinking about it over the weekend, put ad up next week or something.

      No one wanting a short term rental will want to wait 6 weeks for the property anyway, so getting the ad up now is not going to save you any money. It's not like getting it up within 3 days will make sure you're not paying the rent until September either.

      It's also unlikely you can negotiate your way out of it. What exactly can you offer? At best you could argue that the time taken to put the ad up should be deducted from any period the property was left vacant but the rest of the time is just what you signed up for in a contract. Why would they go "sure, we'll go without our income because it suits you"?

      Basically, just chill. There's not much you can do, definitely nothing right now. If it gets close to leaving date and there's no one in the place maybe offer to semi-furnish it or leave some of your furniture to help rent it out quicker, if you think that helps. Other option is hunt yourself for someone. If you find a suitable tenant they can't say no and keep charging you rent.

      • gutterch on 21/04/2022 - 19:00
        +3

        Yes that sounds fair, thanks for reviewing. We'll definitely try to look for a new tenant in parallel as well

    • JimmyF on 21/04/2022 - 20:42

      I'm just trying to understand what this means in practice

      They list the place for rent at the same price you're paying today…. That is it.

      You keep paying rent until they find someone else or your lease is up.

      • Benno007 on 22/04/2022 - 08:42

        In QLD, in my case in a unit in Hamilton that we moved into last November, it was a break lease advertised at $630. The agent actually told us that she has to do everything she can to get someone in, so she said she would lower the rent to the tenants current rate of $605. They wanted someone in the next week, and we still had 3 weeks to go on our other lease, so asked if we could split the difference and start in two weeks, and they were ok with that luckily!

  • Hithere on 21/04/2022 - 17:57
    +2

    I have to take a Landlord's side here, it's you OP who will have to make up their shortfall so be prepared to pay the penalty as per the lease agreement unless a suitable tenant can be found by either you or the agency.

  • HollyT92 on 21/04/2022 - 18:02
    -5

    Why not just break the lease a few days before you go? You're leaving the country anyway, the onus is on the real-estate to find a tenant to replace you. I seriously doubt a real-estate agent, property manager or landlord would be able to halt you at customs over a broken tenancy agreement.

    • freefall101 on 21/04/2022 - 22:13
      +1

      I imagine they might want to come back to Australia one day without some sort of criminal record, or at least a credit rating that is worth a damn.

      • giftcardinspector on 22/04/2022 - 08:36
        +3

        It's not criminal it's civil

        • HelpMeiCantSee on 22/04/2022 - 14:35

          Pretty sure fleeing the country to avoid debt is criminal. I may be wrong though.

        • iCandy on 22/04/2022 - 15:30

          Bad tenants can be reported to a site (can’t remember the name) and the leaving tenants will probably never be able to rent again.

  • bohn on 21/04/2022 - 18:06
    +1

    If the agent tries and couldn't find anyone by the time you leave, you could offer to contribute say $1000 each month until the lease ends, that way the agent can try to lease it at $2800 a month - it might entice someone to take a 4mth lease.

    Not many would be keen to move in and out in a 4 month period, but perhaps if they are getting a great deal they might.

    Alternatively, leave some furniture, and rent it out on airbnb - organise a cleaner etc. Just don't tell the agent ;)

    • gutterch on 21/04/2022 - 18:59

      Thanks for the reply and suggestions! we will definitely keep in mind if they cannot find someone before we leave

      • Quantumcat on 21/04/2022 - 19:15

        I wouldn't worry about that, if the landlord can only get a new tenant by reducing the rent then you will have to make up the shortfall until September anyway

  • voo123 on 21/04/2022 - 18:32
    +1

    Since its your 2nd fixed term lease, according to Tenants Victoria, you might not have to pay anything at all. Here an example of the scenario given by Tenants Vic:

    Example – second fixed-term rental agreement

    You moved into a new property under a 12-month fixed-term rental agreement, starting 1 January 2020 and ending 31 December 2020.

    At the end of your first fixed-term agreement you and the rental provider agreed to enter into a second fixed-term agreement starting 1 January 2021 and ending 31 December 2021.

    The rental provider had paid $240 in advertising costs to find you and a letting fee of $480 to their agent for preparing the agreement for your first rental agreement. However, they did not have to pay any of these costs for your second rental agreement.

    In August 2021, you decided you wanted to move to a different property in an area that you liked better. You gave the rental provider two weeks’ written notice that you would end your rental agreement early and move out on 31 August.

    A new renter was found and entered into a rental agreement to rent the property from 15 September 2021.

    Because the rental provider did not spend any money for advertising or letting fees for your second agreement they cannot ask you to pay any of those costs.

    However, they can ask you to pay costs to cover the rent for the 14 days from the time you moved out, on 31 August 2021, and the time the new renter moved in, on 15 September 2021.

    The monthly rent under the agreement was $1,200. To work out how much you need to pay for the 14 days between 31 August and 15 September calculate the daily rent amount. Do this by multiplying the monthly rent by 12 then dividing that amount by 365.

    $1,200 × 12 = $14,400 yearly rent

    $14,400 ÷ 365 = $39.45 daily rent

    $39.45 × 14 days = $552.33

    So, the total amount you pay is $552.33.

    So if you give your notice early, you might not even have to pay rent until they find a new tenant aswell, as stipulated by Tenants Vic below:

    Give your notice early

    The more notice you can give that you will break your agreement and move out, the better.

    This will give the rental provider more time to find a new renter, reducing the time the property will be vacant and the amount of compensation you can be asked to pay to cover the cost of the rent while the property was vacant.

    30-60 days might be considered 'reasonable' according to the tribunal as the example scenario above was only 14 days notice.
    Food for thought?

    • gutterch on 21/04/2022 - 19:01

      Thanks for the detailed review and explanation! in our case the worrying part is that we might have to pay 4 months of rent in the event where they cannot find a replacement, which is the scary part.

      • voo123 on 21/04/2022 - 19:47

        And they would need to demonstrate that they tried their best to find tenants to the tribunal member. Take screenshots of the listing, is it listed for higher than market rates? Property managers would want to avoid going to vcat if possible.

  • AustriaBargain on 21/04/2022 - 20:36

    It's "ad" for advertisement btw, not "add".

  • Domingo on 21/04/2022 - 22:56
    +1

    I was in a similar situation a few years back. The advertising fee does seem unreasonable as they literally just reactivate the same ad they had up previously.

    We ended up having to pay 1 week's rent as a lease break fee because there was less than 6 months remaining on the term (it was 2 weeks if more than 6 months), the advertising which the RE ended up not charging and would have been liable for rent if they did not find a tenant immediately, but they did. We gave about 6 weeks notice and it worked out fine.

    Keep an eye out for the ad to go up - if not in the next day or two, call the agent and find out what is going on. Additionally, if the landlord does put restrictions on like a 3 month lease only or similar, you could suggest to the RE that they are not taking all reasonable steps to minimise their loss and you are prepared to pursue it further if they continue down that path. However, worry about that when it gets closer, to start with just make sure it looks nice and clean for inspections and hopefully another tenant will be found.

    • TilacVIP on 22/04/2022 - 08:16

      Everything in relations to real estate is a effing rort these days, whether you're a buyer, a seller or one who rents.

      You're getting the gov't, agents, builders etc, getting a good chunk of extra coin out of you, one way or another.

  • Crispr on 22/04/2022 - 08:31
    +2

    I don’t really get the argument from the REA about not advertising it ‘too early’. I’ve recently just signed a lease on a new place and it was a huge bonus for us that the move in date was 6 weeks away as it gave us plenty of time to give notice to our current landlord and organise the move. If we had to move immediately we would have ended up paying rent in both places at once for our entire notice period. Sure some people will need to move at short notice but there’s surely other people like me too!

    One place I used when looking was the ‘Lease Breakers Melbourne’ Facebook page so you could advertise it there to help find a tenant. I also regularly see lease-break ads in our suburb’s community Facebook page so you could have a look and see if your suburb has a Facebook community also.

  • v8bargain on 22/04/2022 - 08:34

    We broke lease multiple times and we work with the agent and the owner to reach fair compensation for each parties. We then amend the lease accordingly so everything signed and on record.

    To our experience, all penalty terms can be discussed and nullified when everyone feels that they are being treated fairly.

    Eg, agency cares about their fees, that's % of the entire lease terms (for the remaining terms). Make sure they got that covered.

    Owner cares having rent continue to be paid, send notice EARLY, so that there's more than enough time to find new tenants.

    We found agency double dips on unreasonable "penalty" with things like costs to find new tenants, advertisement, and other costs that the owner WILL have to pay regardless when you vacate at the end of original lease terms.

    Agents are mostly dodgy AF or simply too busy to care.

    HTH. Goodluck.

  • Supernanny on 22/04/2022 - 10:52

    I had numerous lease breakers as a landlord. Sold the place because of it.
    The most important thing is honest, prompt communication. Make it clear that you want the best outcome for all parties. Be cooperative but don’t let them walk all over you.
    Isn’t the current rental market brisk at the moment? You may be worrying about nothing here.

  • HelpMeiCantSee on 22/04/2022 - 14:40

    It really sounds to me like a lazy agent. In the current climate, securing a new tenant would be easy as. Plenty of people would rent for “short term” and the landlord would likely push back their plans if they’re making money.

    More notice is better, I would have ignored the agents suggestion to send the letter later.

    I think you won’t have any problems or large bills, unless the place is very undesirable.

    Your experience again highlights what we all know- REA are grubs.

  • gutterch on 28/04/2022 - 17:03

    Hi everyone, thank you so much for all the help and feedbacks!

    Our agency has finally posted the ad after a week, however it seems that there is a bug on realestate.com as the house doesn't appear on the map. We have flagged it to our agents who said they contacted realestate.com to fix the issue (still pending).

    I posted the ad on Facebook marketplace and Gumtree, and just had a visit from someone who mentioned he was interested!

    We have already sent the lease break notification to our agency, but I'm now wondering if it's not too late to do a lease transfer instead? There was a penalty of 2 weeks rent to do the lease break, whereas there is only $250 cost to do a lease transfer.
    I haven't had the discussion yet with the agency to see if they would be ok.

    In your experience, do you think the agency would be ok to do a lease transfer instead? (noting we've already given the notice we're breaking the lease)

    Many thanks

    • bohn on 29/04/2022 - 09:43

      In your experience, do you think the agency would be ok to do a lease transfer instead? (noting we've already given the notice we're breaking the lease)

      Should be fine, the only thing is that the agent/landlord needs to approve of the person you are transferring the lease to.
      If there are any red flags (history of non-payment of rent, insufficient proof of income, etc) they won't approve the transfer. If everything is in order I don't think there should be a problem.

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