What to Expect When a Tenant Breaks Their Lease
What to Expect When a Tenant Breaks Their Lease
As an owner, it's important to understand your rights and obligations when a tenant terminates their lease before the lease end date, also known as "breaking the lease." Below is essential information about this process, including recent changes to Queensland tenancy laws.
Reletting Costs Under the New Tenancy Laws
As of September 30, 2024, Queensland’s new tenancy laws will provide more detailed regulations around the costs owners can charge tenants when they break their lease, specifically relating to reletting fees and associated costs.
For tenancy agreements ENTERED INTO after September 30, 2024, reletting costs are clearly defined under the new tenancy laws. These costs are calculated based on the percentage of the lease that has expired when a tenant breaks the lease. Importantly, reletting costs must always be the lesser of the calculated reletting cost or the rent payable until a new tenant takes over the lease.
Reletting Costs for Formula for Fixed-Term Agreements to then use to calculate which is the lesser amount:
- Less than 25% of the lease term expired: 4 weeks' rent .
- 25% to less than 50% of the lease term expired: 3 weeks' rent
- 50% to less than 75% of the lease term expired: 2 weeks' rent
- 75% or more of the lease term expired: 1 week's rent
Example:
For a tenant paying $500 per week and breaking a 12-month lease:
- If the tenant breaks the lease after 3 months (less than 25% expired), the reletting cost would be 4 weeks’ rent, totaling $2,000.
But, if the property is relet in 2 weeks, the tenant would only be liable reletting costs of 2 weeks' rent ($1,000), since that is the lesser amount. - If the tenant breaks the lease after 6 months (50% expired), the reletting cost would be 3 weeks’ rent, totaling $1,500.
But if the property is relet in 1 week, the tenant would only be liable for reletting costs of 1 week's rent ($500).
For Agreements Longer Than 3 Years the formula changes but I won’t detail that here as we don’t have leases over 3 years (we have tenancies longer than three years but usually only 12-month tenancy agreements)
Additional Costs:
Owners cannot charge tenants for any other costs beyond the reletting costs prescribed under the Act. However, tenants are still responsible for any unpaid rent, service charges, or property damages that may have occurred during their tenancy.
Reletting Costs for Leases Signed Before September 30, 2024:
For agreements entered into (ie signed) before the new laws take effect, the tenant remains liable for reasonable reletting costs under the previous section of the Act. These agreements will continue to be valid under the new laws until the lease ends.
Your obligations to mitigate a tenant’s losses.
Your obligations to mitigate a tenant’s losses during the break lease process have not changed with the new laws.
Twelve months since last rent increase.
We will discuss with you what length of lease will be offered to a new tenant as it may depend on how long it is until the rent can be increased. Options are to offer a 12 month lease with a rent increase builtin to the term or offer a shorter lease to realign with the rent increase date.