The financial implications of breaking a lease (and how to handle it)

Where possible, it's best to avoid breaking your lease until the end date. But what happens if you need to bail before the lease is up? Here's what you need to know.

While breaking your lease is less than ideal, situations can arise where you must leave before your agreement ends. You could be facing a job relocation, a relationship breakdown, a sudden illness, or a personal emergency. The key to making this process simple is being transparent and cooperative.

Before you do anything else, provide your landlord with written notice. This should state your intention to leave their property, explaining why and when you plan to leave before the end date specified on your lease.

What's it going to cost me?

There's no set fee for breaking your lease in Australia. That said, you may be liable to compensate the landlord for their losses for things including:

• Rent until new tenants move in or until the end of the fixed term (whichever happens first)
• Reasonable re-leasing costs, such as agent fees
• Advertising costs

Good to know: Your landlord must take all reasonable steps to re-lease the property. They cannot claim rent for any period after the property's been newly tenanted.

It's also worth remembering that a lease isn't technically broken until you've left the property - but this also means your landlord isn't obliged to advertise the property before this point. That said, advertising as soon as possible is in the best interests of both parties, so most property managers/landlords will act on this right away.

If there's any doubt about the date you plan to give up vacant possession, advertising should not begin until there's an agreement.

Remember: Your tenancy agreement should have all the information you need to know about breaking your lease.

Each state and territory has somewhat similar laws around breaking a lease early, but there are a few exceptions. Check-in with your state tenancy advice service, consumer affairs or fair trading if you have questions about your situation.

Your lease type matters

This process is far more straightforward if you're on a periodic lease. You can terminate your lease at any time by giving the required amount of notice. But things get trickier if you're part-way through a fixed-term lease.

When you sign a fixed-term lease, you're effectively signing a binding contract that says you'll pay the specified rent for that period, whether six or 12 months. So breaking a lease isn't something you should do lightly.

Legal reasons you can break a rental lease

Early termination can be done for several legally-specified reasons. They vary slightly across each state and territory, but you'll typically need to contact your local tribunal to make an order on these grounds for these to apply. Some common reasons can include:

• Your landlord has breached the agreement. You may be able to apply to have the agreement terminated, but some states require this to have occurred multiple times before permitting it.
• You're facing undue hardship. Most states and territories have legislation allowing you to apply to the tribunal to terminate your lease, but you may still be liable for compensation.
• Your property has become uninhabitable. This means the property is dangerous or poses a health hazard. You can generally terminate early, whether it's inadequate ventilation, drainage, lighting (or even defective construction).
• You're dealing with domestic violence. Renters in most states can break their lease in domestic abuse situations.

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Tips to keep in mind

Keep an eye on the advertising being done for your property. You want to ensure that your landlord/property manager is doing as much as possible to attract a new tenant. If not, you can factor this into the amount of compensation you're being asked to pay.

Your landlord shouldn't profit from you choosing to break lease and should, as a general rule, keep the costs you'll be required to pay to a minimum.

You shouldn't be charged rent once a new tenant moves into your property. Property managers should also limit advertising costs and re-leasing fees to your landlord's actual costs. Ask for a copy of the invoices for re-leasing or advertising costs to ensure the charges are based on the actual fees paid.

Your break lease action plan

Step 1: Have grounds to terminate early? You may need to apply to the local tribunal for a ruling. Contact your local tenants' union for advice.

Step 2: Don't have legal grounds? Try to give your landlord plenty of notice. Be amicable, and find out if they are willing to end your lease by mutual agreement without penalty (and without a tribunal visit).

Step 3: Consider transferring your lease to someone else. This will help reduce your potential liability. You will need approval from your landlord, but they typically require a good reason to turn you down.

Step 4: Keep an eye on the advertising campaign for your property. Is it being listed on major real estate portals like Rent.com.au? Check that it's being advertised at the earliest date possible. If not, keep records.

Step 5: Being charged for re-leasing or advertising costs? Argue they should be paid on a pro-rata basis.

Step 6: Remember you can ask for itemised invoices of costs to ensure you're paying for the actual costs.

Step 7: If all else fails, contact your local tenant's union for advice.