This information is a guide and should not be used as a substitute for professional legal advice.

Lease breaking

If you want to end your fixed term rental agreement (lease) early by breaking it, you can do so, but you may be asked to pay ‘lease break’ costs.

Ending your agreement (lease) without costs

In some circumstances you can end your fixed-term rental agreement (lease) before it finishes without paying ‘lease break’ costs.

Please read our page on Ending your lease to see if there is an option under the law that will allow you to end the agreement without having to pay ‘lease break’ costs. The page includes information on these circumstances:

  • When you can give notice to end your agreement early without having to pay ‘lease break’ costs
  • Applying to the Victorian Civil and Administrative Tribunal (VCAT) to end your agreement early if you are experiencing family or personal violence, without having to pay ‘lease break costs’
  • Applying to VCAT to end your agreement early if you are experiencing unforeseen hardship, and asking it not to order that you pay any ‘lease break’ costs because of your hardship
  • Transferring your agreement to someone else, which can be less expensive than paying ‘lease break’ costs
  • Ending an agreement by mutual consent, without costs

 

Breaking your agreement (lease) with costs

If none of the options on our Ending your lease page apply to you, you can end your fixed-term agreement (lease) early by breaking your agreement, but it is likely you will be asked to pay ‘lease break’ costs.

Ending your agreement early is usually done by giving the rental provider (landlord) written notice of your intention to vacate, including advising of your vacate date, and handing back the keys when you move out.

There is no minimum notice period in these circumstances.  The more notice you can give that you will be breaking your agreement and moving out the better.

Because of the costs of breaking your agreement we again recommend you check our Ending your lease page to see if there is an option that will allow you to end your agreement without having to pay ‘lease break’ costs.

‘Lease break’ costs

Breaking a rental agreement can be expensive.

If you break your rental agreement (lease) before the end of the fixed term the rental provider stands to lose money, such as not getting the full value of the expenses they paid in renting the property to you, like advertising costs and, if they have an agent, letting fees. They could also lose money by not receiving all the rent they were expecting for the fixed-term period of your agreement.

That is why, if you break your agreement before the end of the fixed term, you may be asked to pay ‘lease break’ costs, to cover any reasonable losses the rental provider would otherwise incur.

The costs you could be asked to pay include:

  • Compensation equal to the cost of the rent from the time you move out and a new renter moves in or until the end of the fixed term, whichever happens first
  • Reletting fee – usually equal to one or two weeks’ rent. This must be based on the fee that the agent charged the rental provider for preparing your agreement, so ask for a copy of the invoice given to the rental provider at the time your agreement was prepared
  • Reasonable advertising costs

Note: before agreeing to pay any costs we recommend you read the sections further down this page, on minimising costs and unreasonable costs.

Costs should be ‘pro-rata’

‘Lease break’ fees are intended to reimburse the rental provider for expenses they paid in renting the property to you that they now stand to lose out on because you are ending your agreement early.

Therefore, those expenses that you can be asked to reimburse only relate to the rental agreement you entered into. You should not be asked to pay any costs the rental provider paid to find a new renter or costs related to the new renter’s agreement.

As well, any costs you are asked to pay for should be worked out on a ‘pro-rata’ basis. This means that the part of the rental provider’s costs you are asked to reimburse should be equal to the time left on the agreement when you moved out as a proportion of the full fixed term. In other words, you can only be asked to pay the advertising or letting costs that cover the period you did not pay rent because you ended the agreement early.

For example, if you had a 12-month fixed-term agreement and ended your agreement 6 months early, you are renting for only half of the agreement. So, you should only be asked to pay half the advertising costs and letting fee the rental provider paid the agent for finding you and renting the property to you. You should not pay the full amount, nor should you pay any amounts relating to the next renter.

Please see the 2 detailed examples below on the costs you could be asked to pay if you are breaking your rental agreement.

Example – first fixed-term rental agreement

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

The rental provider paid $240 in advertising costs to find you and a letting fee of $480 to their agent. The letting fee included the agent’s costs for showing the property to prospective renters, including yourself, and preparing the agreement.

In July you decided you wanted to move to a different property in an area that you liked better. You gave the rental provider more than a month’s written notice that you would end your rental agreement early and move out on 27 August.

A new renter was found and entered into a rental agreement to rent the property from 1 September. You paid the rental provider compensation equal to four days’ rent to cover the time the property was vacant, up to 31 August.

Because you moved out 4 months before the end of your fixed term the rental provider did not get the full value of the advertising and letting costs they spent for your rental agreement, so they can ask you to pay the proportion of these costs that match the proportion of the rental agreement left when you moved out.

Those costs are to be worked out on a ‘pro-rata’ basis, so they are only for the four-month period between 31 August and 31 December, when your fixed term agreement would have ended.

To work out how much you can be asked to pay for those four months calculate the monthly amount. Do this by dividing the amounts by 12 then multiplying the result by four.

Pro-rata advertising costs:

$240 ÷ 12 = $20 a month

$20 × 4 = $80 for 4 months

Pro-rata reletting fee:

$480 ÷ 12 = $40 a month

$40 × 4 = $160 for 4 months

The total pro-rata costs you can be asked to pay to cover the four months from 31 August until 31 December are:

$80 (advertising costs) + $160 (reletting fee) = $240

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.

Consumer Affairs Victoria (CAV) has a rent calculator which can help you work out your daily rent amount.

Minimise costs

There are steps you can take to try to ‘mitigate’, or minimise, any ‘lease break’ costs.

The rental provider must also minimise any ‘lease break’ costs, by taking all reasonable steps to mitigate, or reduce, their losses.

If you do not think the amount of ‘lease break’ costs you are asked to pay is reasonable, and do not believe the rental provider has taken all reasonable steps to minimise their losses, we recommend you do not pay anything until they take a claim for costs against you to VCAT.

At the VCAT hearing you will be able to present any evidence you have that the rental provider did not ‘mitigate’ their losses. VCAT will take this into consideration in deciding whether ‘lease break’ costs should be paid and if so, the amount that should be paid. See the section headed ‘Unreasonable costs’ on this page.

Find out more about VCAT hearings on the tribunal’s website.

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.

Include your vacate date

Make sure it is clear in your notice that you will move out before the end of the fixed term. Include the exact date you will move out and return the keys.

You should give your notice in writing, keeping a copy for yourself. You can use Consumer Affairs Victoria’s (CAV) ‘Notice of intention to vacate’ form. There is no option in this form on how much notice needs to given for breaking an agreement, but give as much notice as you can.

Also follow up to confirm your notice has been received to prevent any issues if the rental provider, or agent, later say they did not receive it.

Ask the rental provider to find a new renter

When you give your notice make it clear that you want the rental provider, or agent, to start looking for a new renter straight away.

The rental provider is expected to ‘mitigate’ their losses. This means they are expected to take all reasonable steps to keep any losses they may incur due to you breaking your agreement to a minimum and to find a new renter as quickly as possible.

If they do anything to make it harder to find a new renter, such as putting up the rent, or if they do not make an effort to find a new renter, you can argue that they have not ‘mitigated’ their losses and that you should not have to pay for all their compensation costs for loss of rent while the property is vacant.

If you cannot reach an agreement about the costs, we recommend you wait until a claim by the rental provider or agent has gone to VCAT. At the VCAT hearing about the claim you can present any evidence that the rental provider has not ‘mitigated’ their losses.  See the section headed ‘Unreasonable costs’ on this page.

Offer to help

The more you can do to help find a new renter, such as having the property available for inspection, or advertising the property yourself, the less you are likely to have to pay ‘lease break’ costs.

If you offer to help find a new renter but the rental provider refuses your offer or unreasonably rejects an application of someone you find to rent the property, you can argue that they have not ‘mitigated’ their losses. You can argue that you should not have to pay for ‘lease break’ costs resulting from them not taking action to minimise their costs.

If you cannot reach an agreement about the costs, we recommend you wait until a claim by the rental provider or agent has gone to VCAT, where you can present any evidence that the rental provider has not ‘mitigated’ their losses. See the section headed ‘Unreasonable costs’ on this page.

Check on the progress of reletting the property

Make sure the rental provider is taking steps to relet the property after you have given your notice.

If you have internet access, check if the property has been advertised for rent online, including on the agent’s website. You can also check the rental listings available from the agent.

If the property is not being advertised, or is being advertised at a higher rent, or the ad is misleading, keep this as evidence that the rental provider has not tried to keep their losses to a minimum – that is, they are not taking steps to ‘mitigate’ their losses.

You can also remind the rental provider that they are expected to take reasonable steps to find a new renter as quickly as possible and keep their costs to a minimum, and that VCAT would take this into consideration on deciding if there should be any ‘lease break’ costs.

If the reason the property is not being advertised is because a new renter has already been found, check the date the new renter will move in so you know how long the property was vacant for.

Do not keep paying rent

You should only pay rent up to the day you move out and return the keys.

The rental provider can ask you to pay them compensation equal to the cost of the rent from the time you move out and a new renter moves in or until the end of the fixed term, whichever happens first. But you do not have to pay this upfront. Nor do you have to enter into any ‘lease break’ agreement that says you need to keep paying rent after you have moved out.

Once a new renter moves in you can then pay the rental provider compensation for any lost rent for the time the property was vacant.

If you do not think the amount you are being asked to pay is reasonable, and do not believe the rental provider took reasonable steps to minimise their losses and find a renter quickly, we recommend you do not pay anything until the rental provider has made a claim for the costs to VCAT, where you can present your evidence that the rental provider did not ‘mitigate’ their losses.

Return the keys

Make sure you return the keys on the day you move out. If you do not return the keys the property will not be treated as vacant and available for a new renter to move in.

Unreasonable costs

If you do not think the amount you are being asked to pay is reasonable, and do not believe the rental provider took reasonable steps to minimise their losses and find a renter quickly, we recommend you do not pay anything until a claim has gone to VCAT, where you can present your evidence that the rental provider did not ‘mitigate’ their losses.

In deciding on whether any ‘lease break’ costs are payable, and the amount payable, VCAT must calculate any advertising and reletting costs on a basis that is proportionate to the period left on your fixed term agreement when you moved out – that is, calculate them on a ‘pro-rata’ basis. The legal basis for this is section 211A of the Residential Tenancies Act 1997.

In deciding how much compensation, if any, is payable for loss of rent, VCAT must take into account the amount of lost rent the rental provider could have avoided if they ‘mitigated’ their losses – that is, took all reasonable steps to promptly relet the property [section 211A].

VCAT must also consider any severe hardship you would have been expected to suffer, due to an unforeseen change in your circumstances, if the rental agreement had continued [section 211A].

If you are ending your agreement early because of hardship you should read our Ending your lease page, because you can apply to VCAT for orders that you can end it for this reason, instead of breaking your agreement. In such circumstances, VCAT can decide whether or not you have to pay any ‘lease break’ costs.

 

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