A tenant cannot end a fixed term lease early - at their choice - without being responsible for costs to relet the property. But the landlord can agree not to claim these costs. Make sure any agreement not to claim costs is in writing.
The tenant is breaking the lease if they move out of the property before the end of a fixed term agreement. This means the landlord can claim costs for:
- loss of rent - there are maximum timeframes tenants are liable to pay rent when terminating fixed term tenancies early - see further information below.
- advertising
- reletting – fee charged to the landlord by an agent.
Some of these costs may be claimed even if the tenant leaves after a breach notice (238KB PDF) for rent arrears is served.
Reletting the property
When a tenant, under a residential tenancy agreement, leaves a property before the lease ends, the landlord could claim for the loss caused. A claim may not be made if the landlord doesn’t try to relet the property as soon as possible – this is called mitigating the loss.
The tenant can assess if the loss is being mitigated by asking:
- Is the property:
- being advertised appropriately?
- being shown to prospective tenants?
- Has demand in this area dropped and should the rent be reduced? When trying to relet, the landlord should review the rent amount regularly.
- If the property has been advertised at a higher rent, has this delayed the property being leased?
The landlord doesn’t have to advertise before the tenant gives back possession of the property. If the date the tenant will leave is unclear, the landlord should be cautious about advertising as there is still a binding lease agreement.
Formulas developed by the South Australian Civil and Administrative Tribunal (SACAT) must be applied to all advertising and reletting costs. It is recommended that tenants seek advice on applying the formulas, as they could differ if the tenant:
- breaks their lease in the first quarter of the lease term
- pays rent to the end of their fixed term lease, as lease obligations may have been met.
Advertising fee
The SACAT formula must be applied to all advertising costs, including any advertisements placed before the tenant moves out. The total term of the tenancy must be used - eg 2 x 12 month terms is a 2 year tenancy.
Advertising using media other than Adelaide newspapers such as the internet is reasonable. But this will need to be proven as the best option for the property. Claims should be made using standard charges as tenants are not expected to pay for corporate headers and branding.
Formula for advertising fee
Total advertising costs multiplied by the remaining weeks from abandonment to the end of the agreed term, then divide that amount by 3/4 of the whole agreed tenancy term.
Each year is counted as 52 weeks.
Example –
The agreed lease term 2 years = 104 weeks - 3/4 of that = 78 weeks
The advertising cost = $87
The number of weeks left on the agreement =12
Calculation -
Multiply $87 by the 12 weeks left on the agreement 87 x 12 = $1044
Divide by 3/4 of the 104 week tenancy agreement (78 weeks) $1044 ÷ 78 = $13.38 to be paid toward the advertising costs.
Reletting fee
Formula for a reletting fee
The SACAT formula must be applied to the letting fee charged by an agent. The agent can add GST to the reletting fee before the formula is applied.
The total term of the tenancy agreement is used to work out the claim for the letting fee.
Example –
Rent = $100 + 10% GST = $110 per week
Term of tenancy 1 year ( 52 weeks) 3/4 = 39 weeks
Time to end of tenancy term when the property is relet = 12 weeks
Calculation -
Reletting fee (maximum of 2 weeks rent plus GST) $220 x 12 weeks = $2640
Divide that amount by 3/4 of the whole tenancy term $2640 ÷ 39 = $67.69
Loss of rent
The tenant will not have to pay more than one month’s rent if, under a residential tenancy agreement for a fixed term, they terminate the agreement early and there is less than 24 months remaining on the lease.
If there is more than 24 months remaining on the lease, the tenant will have to pay one month’s rent for each 12 month period of the remaining term - calculated from the day they leave the premises.
A tenant cannot be asked to pay for more than 6 months’ rent in total. This doesn’t affect a landlord’s entitlement to fees for reletting and advertising.
Hardship
A tenant or landlord can apply to SACAT to end the tenancy if continuing it will cause them undue hardship. Generally, ‘undue hardship’ doesn’t include financial difficulties.
