When a tenant signs a fixed term lease they are committing to stay for the full term. If circumstances change and a tenant wants to move out before the end of the fixed term, there could be potential costs involved.
Costs tenants may have to pay
If a tenant needs to end their agreement early, they should give as much notice as they can. The more a tenant can do to help, the less they may have to pay. Tenants should make it as easy as possible for the landlord or agent to show the premises to potential new tenants.
Should a tenancy agreement not include a break fee, a landlord may wish to seek compensation for financial loss due to the tenant breaking the lease term early.
These costs may include loss of rent, advertising and a letting fee (if the landlord uses an agent). If the tenant and landlord are unable to agree on the amount of compensation, the landlord may claim from the bond or apply to the NSW Civil and Administrative Tribunal (the Tribunal).
Tenants should be aware that if they owe more money than the bond, their name could be listed on a tenancy database. These listings can make it difficult to rent again elsewhere.
The break fee is a penalty a tenant agrees to pay if they move out before the end of the fixed term.
If the fixed term of the agreement is for three years or less the break fee is:
- six weeks rent if the tenant moves out in the first half of the fixed term
- four weeks rent if the tenant moves out in the second half of the fixed term.
If the fixed term is for more than three years and the tenant and landlord agree to include a break fee clause, they can agree on the amount and write it into the agreement.
If the tenancy agreement does not include a break fee, a landlord may still seek compensation by applying to the Tribunal. These costs may include loss of rent, advertising and a letting fee if the landlord uses an agent. If the tenant and landlord are unable to agree on the amount of compensation, the landlord may claim from the bond or apply to the Tribunal.
Breach by the landlord
If the landlord is not complying with the terms of the tenancy agreement, the tenant may be able to end their lease early without penalty.
If a tenant thinks the breach is serious enough to justify ending the tenancy, they can give 14 days’ written termination notice to the landlord. If the landlord disagrees, they can apply to the Tribunal.
Alternatively, the tenant can apply to the Tribunal without giving notice. The Tribunal can refuse to make an order if the landlord remedies the breach. If the tenant has already moved out, they may have to pay the costs of breaking the lease.
Breaking the agreement without penalty
In limited circumstances, a tenant can break the agreement early without penalty. A tenant can give 14 days’ written notice to end an agreement early if:
- they have accepted an offer of social housing (eg. from Housing NSW)
- they need to move into an aged care facility or nursing home (not a retirement village)
- the landlord has put the premises on the market for sale, and they were not told before signing the lease that the property would be sold.
A tenant can give 21 days’ written notice to end an agreement early if:
- they have a fixed term agreement of more than 2 years and they have been given a rent increase notice, or
- their co-tenant passes away.
If a tenant gives notice for any of these reasons, they do not have to pay compensation. A tenant is only liable for the rent until the notice ends and they hand back possession of the premises.
If the landlord and tenant both agree, any tenancy agreement can be terminated at any time.