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When a tenant breaks a fixed term lease

A property lease is essentially a legal and binding agreement between a tenant and landlord. As part of the contract, the tenant agrees to rent the landlord’s property for a fixed term, usually six or twelve months. If a tenant subsequently wants to terminate the lease before the fixed term has expired, there are potential costs to be considered.

In most cases, the tenant is liable to pay rent until suitable replacement tenants can be found, as well as a percentage of the landlord’s re-letting costs. As an example of calculating the re-letting costs, if the tenant were to break the lease halfway through the fixed term period, they would pay 50% of any re-letting fee payable to the agent as well all marketing costs (eg. signboards and advertising).

By law, the landlord and their agent has to do everything they can to try and find a new tenant as soon as possible while minimising the vacating tenant’s cost.

If a landlord does anything to make it harder to find a replacement tenant, such as increasing the rent or unreasonably rejecting potential tenants, the vacating tenant may not have to pay the full amount requested. If there is a dispute over the amount charged, it will usually be adjudicated at the Victorian Civil and Administrative Tribunal (VCAT).

There are only a few ways a lease can be broken without financial penalty to the tenant. The most common if the landlord fails to keep to the terms of the lease, like not performing essential and urgent maintenance or repairs as per itemised by Consumer Affairs Victoria. This includes such items like:

.    a burst water service;
.    a blocked or broken toilet system;
.    a serious roof leak;
.    a gas leak;
.    a dangerous electrical fault;
.    flooding or serious flood damage;
.    serious storm or fire damage;
.    a failure or breakdown of any essential service or appliance provided by the landlord or agent for hot water, water, cooking, heating, or laundering;
.    failure or breakdown of the gas, electricity, or water supply;
.    any fault or damage in the premises that makes the premises unsafe or insecure;
.    an appliance, fitting or fixture that is not working properly and causes a substantial amount of water to be wasted;
.    a serious fault in a lift or staircase.

If the breach is serious as indicated above, the tenant can give a 14 day notice for the landlord to rectify the problem at hand. If the tenant has served 2 of these notices for the same issue and it is still not rectified, they then can give a 14 day notice to move out of the property. If the landlord disagrees with the breach being given by the tenant, they can also take the tenant to the Tribunal, it works both ways!

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