Compliance corner with Simon Kinsey - Breaking a lease


There are times when a tenant or a landlord want to break a fixed term lease early.

Today we take a brief look at the financial implications and the time frames around this.

If a tenant wants to break a fixed term lease

If a tenant wants to break a fixed term lease early, it is important to give as much notice as possible. This will help the landlord and agent advertise the property to find a potential new tenant.

 In NSW, there is a provision in the lease for a break lease fee. If there is not a break lease fee clause in the lease, the landlord can seek compensation for financial loss due to the tenant breaking the lease early. This can include advertising costs and rent payment until a new tenant is found.

 Of course the landlord and tenant may both come to an agreement and the tenancy can be terminated at any time.

 There are however limited circumstances where the tenant can break the lease early without penalty and this can include accepting an offer of social housing, moving into an aged care facility and if the landlord seriously breaches the terms of the tenancy agreement.

 Finally, in circumstances of domestic violence a tenant can end their tenancy during the fixed term, but in order to do this evidence will need to be provided to the landlord.

If a landlord wants to break a fixed term lease

 The lease is a fixed term legal agreement between the landlord and tenant for the period set out in the agreement. The tenant has the right to stay at the property until the end of the fixed period.

 If a landlord wishes to terminate the fixed term early, then they can do so by mutual agreement with the tenant. Otherwise, there are very few options to get possession back of the property unless the tenant breaks a term of the lease. This breach can include the non-payment of rent, in line with the applicable States arrears process or if the premises are destroyed.

 An important point to note is that if the landlord wishes to sell the property while a tenant is renting the premises under a fixed term, the landlord cannot terminate the tenancy.  If the landlord and tenant come to a mutual agreement the fixed term can end, but if they can’t the tenant can stay until the end of the fixed term.

Simon Kinsey 
Head of Compliance
Yabonza Smart Property Management

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