Lease breaks - Cost break down.
What are the costs for breaking a rental agreement.
In the event of a renter breaching their lease, they are generally not subject to paying a penalty fee. However, it is important to note that certain costs may still apply in order to ensure that the rental provider does not suffer any financial losses as a result of the agreement being broken. It is worth noting that a rental agreement may specify fees that apply when the agreement is broken. In such cases, the agreement must clearly state the reasons for the fees.
It is also worth mentioning that the specific costs a renter is required to pay can vary depending on the type of rental agreement they have entered into, as well as the expenses incurred by the rental provider. Therefore, it is advisable to carefully review the terms and conditions of the rental agreement in order to understand what costs may apply in the event of an early termination of the lease.
What are the costs for lost rent?
If a renter departs from a rental property before the end of their lease, the rental provider may seek payment from the renter. In such cases, VCAT (Victorian Civil and Administrative Tribunal) will determine the appropriate amount that the renter must pay by issuing a compensation order.
For fixed-term rental agreements lasting longer than 5 years, VCAT is restricted to ordering a compensation of no more than one month's rent for every 12 months that remain on the lease. For instance, if the agreement has 3 years left, the rental provider can request payment of up to 3 months' rent. It is important to note that the rental provider cannot claim for more than 6 months' rent under any circumstances.
However, if the rental provider successfully rents out the property to another renter, the renter who broke the agreement is not required to continue paying rent after the property is re-let. In such situations, the rental provider must take all necessary measures to find a new renter as quickly as possible.
If a renter believes that they have been paying rent during the period that the property was being re-let, they have the right to apply to VCAT for reimbursement of the rent paid. VCAT is responsible for resolving disputes and making decisions in such situations.
What are the costs for advertising?
In the event that a renter terminates their lease early, they may be liable for reimbursing the rental provider or agent for any reasonable expenses incurred in re-advertising the property.
Reasonable expenses are typically viewed as expenses that are considered to be fair and justifiable by most individuals. As the law does not provide a precise definition of what constitutes reasonable expenses, if the parties involved cannot come to an agreement regarding the same, they may seek the assistance of VCAT to make a ruling on the matter.
What are the costs for re-letting fees?
The majority of real estate agents charge rental providers a fee, known as a re-letting fee, to locate a new renter for their property after the current renter vacates the premises. If the rental provider employs an agent to find a new renter and the current renter breaks their agreement, they may be required to pay the re-letting fee.
Typically, the amount of the fee that the renter is required to pay is determined by the amount of time remaining on their agreement. In other words, the renter must pay a proportionate share of the fee based on the percentage of the remaining time left on the agreement. For instance, if there are six months left on a 12-month agreement and the re-letting fee is $500, the renter would be required to pay half of the fee, which is $250.
Information about the re-letting fee is generally included in the rental agreement or provided to the renter at the beginning of the rental term.
What are the costs that a renter should not be shouldering?
a penalty for breaking the agreement – they just need to cover costs the rental provider has to pay
rent when there is a new renter in the property
advertising fees when the property wasn’t advertised
re-letting fees if the property is rented directly with the owner and not through a real estate agent.