Ending a Fixed Term Tenancy Agreement Prior to the Expiry of the Tenancy: Queensland

Drew Lauchland

27 Apr, 2020

The Residential Tenancies and Rooming Accommodation Act 2008 (‘the Act’) provides that a fixed term tenancy agreement can be terminated by a tenant by giving a Notice of Intention to Leave (Form 13).

Section 308 of the Act provides:

308 Notice of intention to leave without ground:

  1. The tenant may give a notice of intention to leave the premises to the lessor without stating a ground for the notice.
  2. A notice of intention to leave under this section is called a notice of intention to leave without ground.

If it is a fixed term tenancy, and the Form 13 specifies a date earlier than the expiry of the tenancy, then it is commonly referred to as a ‘break lease’.

the fact is that a tenancy agreement is a contract entered into between two parties, and therefore general common law principals apply if one party breaches that agreement

What then are the consequences for the landlord and the tenant.

There is often a misconception that despite the early termination of the tenancy the ‘tenancy agreement’ continues until either (a) a new tenant is found or (b) the tenancy agreement comes to an end and the existing tenant is liable to pay rent until either (a) or (b) are satisfied.

That perception is incorrect.

Once the date specified on the Form 13 is reached (for termination of the tenancy agreement), the tenancy ceases to exist. The tenant’s obligation to pay rent also ceases to exist as there is no longer a tenancy agreement in place. The tenant’s obligations under the tenancy agreement continue up to the date specified in the termination notice – i.e. to pay rent, utility charges, clean etc.

What does occur however after that date of termination, is the landlord’s right to be compensated for the fact that the tenant has breached the agreement to continue the tenancy until a fixed date. Therefore, the landlord has the right to seek compensation from the tenant for breaching the agreement that was entered. Despite the fact there is legislation governing residential tenancies, the fact is that a tenancy agreement is a contract entered into between two parties, and therefore general common law principals apply if one party breaches that agreement (subject to specific provisions of the legislation).

In addition, there is the Tenancy Agreement which should make specific reference to the consequences of early termination of a tenancy agreement – i.e. break lease fee, advertising. Provided none of the provisions of the Tenancy Agreement are contrary to any provisions of the Act, they become part of the contract between the landlord and the tenant and are enforceable as such.

Most tenancy agreements contain special conditions. To avoid any doubt in the event that you have to apply to QCAT for a compensation Order ensure that your tenancy agreements contain special conditions to the effect that in the event of a breach of the agreement and early termination of the tenancy the tenant acknowledges that he/she /they will have to pay specifically:

  • the landlord’s reasonable costs of advertising the property.
  • a break lease fee which is usually equivalent to the amount you will charge your landlord for re-leasing the premises. This will usually be the cost set out in your management agreement with your landlord. The industry standard is one week’s rent plus GST. To remove any doubt, ensure that the special condition in the tenancy agreement specifies what that amount equates to.

Remember, the application to QCAT is for ‘compensation’ because of the tenant breaching the agreement. Therefore, QCAT can only makes orders for compensation for the actual loss suffered by the landlord. Therefore, if the amount you charge the landlord under the management agreement for re-leasing the premises is one week’s rent, you cannot then apply to QCAT for two or more weeks rent.

The actual application to QCAT is made under section 419 of the Act which provides:

419 Applications about breach of agreements-

  1. This section applies if any of the following claim there has been a breach of a term of a residential tenancy agreement or a rooming accommodation agreement-
    1. a lessor or tenant under the residential tenancy agreement; (b) a provider or resident under the rooming accommodation agreement.
  2. The lessor or tenant, or provider or resident, may apply to a tribunal for an order about the breach.
  3. The application must be made within 6 months after the lessor or tenant, or provider or resident, becomes aware of the breach.
  4. For a residential tenancy, the application may be made-
    1. during the term, or after the end, of the agreement; and (b) whether or not an application for termination, or a termination order, has been made about the agreement; and (c) whether or not a rental bond for the agreement is held by the authority when the application is made.
  5. For rooming accommodation, the application may be made-
    1. during the term of the agreement or after the agreement ends; and (b) whether or not a rental bond for the agreement is held by the authority when the application is made.

a landlord must take every possible step to re-lease the property at the earliest opportunity.

The other aspect of compensation is the landlord’s loss of rent because of the breach of the agreement.

An overriding aspect is the landlord’s duty to mitigate any loss. This is set out in section 362 of the Act:

362 Duty to mitigate loss or expense-

  1. This section applies to the lessor if the lessor incurs loss or expense because of-
    1. the tenant’s failure to hand over vacant possession of the premises after a termination order is made by a tribunal; or (b) the tenant’s abandonment of the premises; or (c) another act or omission of the tenant.
  2. This section applies to the tenant if the tenant-
    1. incurs loss or expense because of an order made by a tribunal or registrar declaring that the tenant abandoned the premises on a stated day; and (b) contends that the premises were not abandoned or were only abandoned on a day after the day stated.
  3. The lessor or tenant-
    1. must take all reasonable steps to mitigate the loss or expense; and (b) is not entitled to receive compensation for any loss or expense that could have been avoided by taking the steps.

This of course means that a landlord must take every possible step to re-lease the property at the earliest opportunity. This unfortunately is one area of the residential tenancy law that is ‘murky’ because the question of assessing the ‘mitigation of loss’ by a landlord is often very subjective. For instance, examples of where the Tribunal have refused compensation for loss of rent:

  • the property was advertised at a higher rent than under the tenancy agreement the subject of the application.
  • the damage done to the property by the tenant was unable to be repaired as the landlord was waiting on the insurance company to finalise the claim. A landlord’s impetuosity is not a defense to failure to mitigate loss.
  • The landlord, due to the bad experience with the tenant, became overly zealous in the selection process with prospective tenants.
  • The landlord failed to recognise that the rental market in that area no longer supported the rent that he/she was seeking.

All these factors, and others, will be considered by QCAT when considering whether a landlord has mitigated loss.

Many property managers that we deal with complain that QCAT decisions are unfair. In response, we have to say that in most cases the reason the decision has not been given as desired is because of poor preparation and presentation.

If you are applying to QCAT then we suggest that the following are fundamental necessities:

  • Know your legislation. Be able to direct the Adjudicator to the relevant section of the legislation. As indicated above a claim for compensation for a breach of a fixed term agreement is under section 419 of the Act.
  • Have your evidence available. If you are claiming advertising expenses, then have evidence of that advertising. We have seen numerous applications in QCAT rejected for advertising where a ‘global’ figure was sought. If you are claiming a ‘break lease’ fee, make sure you can justify it. Have your management agreement available to show how much you will be charging the landlord. Better still, in addition, have a copy of the invoice to the landlord for the re-letting fee.
  • For loss of rent, ensure you have all evidence available as to the attempts to re-lease the premises. If the premises have had to be re-leased at a lesser rent, have a market appraisal available to show why. If the landlord had to effect repairs prepare a timeline showing what steps were taken to have those repairs undertaken as quickly as feasible to allow the property to be released to the rental market. If applications were received for the property but were rejected, ensure that you have detailed reasons why.
  • Have all your claims for compensation prepared in schedule form. Do not make the adjudicator have to work out what the quantum of your claim is. Specify your claim for compensation by reference to dates and amounts (i.e. if the rent had to be reduced work out what the amount equates to to the end of the fixed term agreement).

There are also a couple of other factors that should be borne in mind. Remember that any application to QCAT for compensation can only be made within 6 months of the date of the breach (i.e. the date of early termination). If, for instance, a property has been impossible to re-lease, despite all reasonable attempts to do so, and no application is made to QCAT within that 6 months, then the landlord will lose all rights to seek compensation. The recommendation is if that is the scenario, the application should be made, and the landlord will simply have to accept compensation up to the date of the application (or hearing date) and forego any further compensation.

The second matter that should be taken into consideration is the fact that residential tenancy disputes are decided by QCAT. Therefore, any dispute is subject to the provisions of the QCAT legislation.

One aspect of that legislation that we have seen arise in several decisions is the following:

Deciding minor civil dispute generally-

  • In a proceeding for a minor civil dispute, the tribunal must make orders that it considers fair and equitable to the parties to the proceeding in order to resolve the dispute but may, if the tribunal considers it appropriate, make an order dismissing the application.

‘Fair and equitable’ is a term that has been used in many reported decisions, and while the above commentary might indicate that there are established principals upon which QCAT should operate from a legal point of view (i.e. the assessment of compensation), do not be surprised if the fair and equitable assessment may be used.

Remember, that as valued clients of Barclay MIS, if you require any assistance in matters of this nature, please do not hesitate to contact us.

NB The above commentary also applies to instances of termination of fixed term tenancies for unremedied breaches/abandonment, as they are all breaches of the Tenancy Agreement.

 

You May Also Like…

Contact Barclay MIS

Get in touch with the Barclay MIS team.

T: 1300 883 916
F: 1300 883 917

For over 35 years, Barclay MIS has been innovative in the field of debt recovery. We offer a range of products and services that utilises cutting edge technology that securely recover debt in accordance with legislation.

Copyright © 1985 - 2021 BARCLAY MIS. All Rights Reserved. ABN 79 096 963 692

Except as permitted by the copyright law applicable to you, you may not reproduce or communicate any of the content on this website, including files downloadable from this website, without the permission of the copyright owner.

Barclay MIS Protect & Collect Pty Ltd supports and encourages the dissemination and exchange of the information. However, copyright protects material on this website.

Although we have no objection to this material being reproduced, we assert the right to be recognised as author of our original material and to have our material remain unaltered.

Enquiries regarding the reproduction of our material may be directed to drew@barclaymis.com.au or telephone 1300 883 916.

Copyright of Barclay MIS Protect & Collect Pty Ltd’s materials resides with Barclay MIS Protect and Collect Pty Ltd. Apart from any fair dealings for the purposes of private study, research, criticism, or review as permitted under the Copyright Act 1968, no part may be reproduced or re-used for any commercial or other purpose without written permission from our department.

Resources & FAQ's

Text here ...

Frequently Asked Questions

Text here ...

Residential Property

Find Out More

Storage Sheds

Find Out More

Trades

Find Out More

Gyms

Find Out More

Commercial Property

Find Out More

Child Care Centres

Find Out More

Marinas

Find Out More

General Small Business

Find Out More

Strata Management

Find Out More

Veterinary Clinics

Find Out More

Dental Clinics

 Find Out More

Medical Specialists

Find Out More

Close Bitnami banner
Bitnami