Early Lease Termination for a House in Melbourne

barga in on 16/09/2020 - 14:15
Last edited 16/09/2020 - 16:34 by 1 other user

Hi Fellow OZBs

I am in a bit of a pickle here and hoping that I can get some advice to get myself out of this situation.

I rented a house in March 2020 with a one year lease. Meanwhile, I ended up buying another house and this house is now about to get settled. I have told my Real Estate Agent that I will be breaking the lease. They have dragged their feet in readvertising the property, but finally, they did it two weeks ago on their own website and Realestate.com.au. I also advertised it earlier on Facebook marketplace. Till date, there has not been any enquiry via the agent, but two enquiries via FB. Both enquiries did not reach the application stage.

In a normal market situation, the house would have been let in a few weeks, being in a good location and in a near new condition. However, Covid-19, especially in Melbourne, has made it very hard and market conditions are difficult.

Some of the things I have thought about:
1. Can I rent the house I bought instead - no, as the family is really keen to move in there
2. Go to Consumer Affairs / VCAT - They are not interested as I am not financially impacted by COVID (though the rental market is in hibernation due to COVID and therefore I cannot let go the rent)

Can you please suggest anything that may help me in avoiding this financial pickle and stress. I fully realise that it is my doing, so please be nice.

Thank you heaps in advance.

Home & Garden

Comments

  • tsunamisurfer on 16/09/2020 - 14:28
    +23

    The real estate agent has already re-advertised so they are doing 'their level best' to find new tenants.

    In the meantime, you can enjoy your new home whilst paying for the rent you factored in your budget when you decided to buy a house 6 months into a 12 month lease.

  • [Deactivated] on 16/09/2020 - 14:31
    +2

    Go to Consumer Affairs / VCAT

    What are you disputing?

    • barga in on 16/09/2020 - 14:49

      Not disputing people, advising the financial pressure situation, which is somewhat due to lockdown.

      But CAV saying not accepting the argument

      • [Deactivated] on 16/09/2020 - 15:22
        +4

        which is somewhat due to lockdown.

        Unfortunately, it is not.

        The lack of people seeking a rental is caused by the lockdown but if you didn't break your lease, that would have been irrelevant.

        Your financial pressure was self inflicted and can be wholely attributed by entering a lease and a mortgage agreement voluntarily.

        All the best with the PM finding a tenant. I wouldn't waste any more time/effort trying to bend the "financial pressure" line. It is demonstrably unrelated.

        • barga in on 16/09/2020 - 15:28
          +1

          Thanks tshow, I appreciate the advice and your concern.

          • [Deactivated] on 16/09/2020 - 15:29

            @barga in: AllG.

  • trustnoone on 16/09/2020 - 14:39

    What does your contract say regarding leaving early? Usually you will have to pay out x amount, is it a huge amount?

    • barga in on 16/09/2020 - 14:45

      Yes, I am responsible to pay until March 2021, which will be roughly $15K

      • trustnoone on 16/09/2020 - 14:51
        +1

        Not a lawyer but read this:

        If you break a long-term lease – that is, it did not end early by mutual agreement or a VCAT order on hardship grounds - the landlord can ask you to pay one month’s rent for every full year remaining on the lease.

        Don't know if rules are changes due to covid. They may also charge you a re-advertising fee and re-letting fee.

        Taken from consumer.vic

        https://www.consumer.vic.gov.au/housing/renting/ending-a-lea…

        edit—-
        I didn't read the short term lease unfortunately? Which is:

        You may have to pay rent until the end of your lease or until a lease with a new tenant begins.

        • barga in on 16/09/2020 - 15:17

          yep read in the same way as you did. It increased my hopes for a short time. :-)

      • bobbified on 16/09/2020 - 16:51
        +3

        If worse comes to worst, you can advertise it (or agree with the agent for them to advertise it) for less than what you've signed up for and then you make up the difference each week/month between what it's rented out for now vs what you agreed until the end of your lease. That way, you don't end up paying the whole $15,000.

        Even if you advertise it for $100/week less than what you've got on your lease, there's about 28 weeks between now and the end of March 2021, so it'll cost you $2,800 instead of $15,000.

        I fully realise that it is my doing, so please be nice.

        btw, I have to say that it's actually refreshing to see someone acknowledge their responsibility for a change.

        • Whisper Quiet on 17/09/2020 - 11:07

          Best answer by a long way!

        • barga in on 17/09/2020 - 11:26

          Thanks for your advice and kind words. I will be touching base with the agent and offer to compensate for the difference due to reduced rent

        • dasher86 on 17/09/2020 - 13:28

          what happens after 28 weeks when the new tenant signs up for 12 months?
          OP will probably have to cough up 52*$100, as i don't see the landlord wanting to take 24 weeks at $100 per week less; than it makes it even harder 12 months following that when they need to increase it by another $100 to get back to where they were.

          • Whisper Quiet on 18/09/2020 - 07:38

            @dasher86: It will be stipulated in the lease of the new tenant. Pay this amount for X amount of weeks. Following that, rent will increase to this amount. Either way new tenant wins out by a huge margin. OP doesn't have to pay for full remainder of lease and new tenant gets up to $100 per week off for that time.

  • thatonethere on 16/09/2020 - 14:39
    +2

    Do you mean March 2020? If you rented in March 2019 for 1 year you are probably month by month?

    With Melbourne looking like it will come out of lockdown you should be ok soon.

    You could try and stall settlement.

    Note that you can vacate and ceasing paying rent at that point - but eventually you will have to cover the costs when it finally does rent out (https://www.tenantsvic.org.au/advice/breaking-your-lease/#:~…).)

    • barga in on 16/09/2020 - 14:44

      Sorry I meant 2020. fixing now. stalling settlement is also not a possibility as seller is keen on settling. Not paying rent until the final compensation is encouraging. Thanks for the advice

  • Quantumcat on 16/09/2020 - 15:48
    -2

    Read your lease. You won't have to pay the whole lease. You should only have to pay
    A) break lease fee
    Plus
    B) rent until new tenant is found OR X number of weeks whichever is shorter

    You shouldn't be liable for more than around 6 weeks of rent but check your lease. If it isn't mentioned there will be a default number, check Victoria renting rules

    Wait that's all wrong. Just read the link up above. That sucks. What motivation is there for the landlord to approve a new tenant??

    rent until new tenants move in or until the end of the fixed term (whichever happens first)

    Maybe you should indicate to the agent that it is going to be really hard to extract money out of you and the landlord shouldn't count on getting the full term out of you without expensive court costs. You don't have to worry about getting a bad reference as you own your new house.

    • dizzle on 16/09/2020 - 17:43

      What motivation is there for the landlord to approve a new tenant??

      Why should they have to do extra work because of the tenant deciding to not fulfill their side of the contract?

      I can understand hardship circumstances. But OP actively put himself in a position where he would have to break the lease and is looking for a way to get out of it. Very little sympathy from me.

      • Quantumcat on 16/09/2020 - 18:35
        -1

        The rules don't differentiate between hardship and non-hardship circumstances.

        • dizzle on 16/09/2020 - 19:01

          You're kinda proving my point. The rules state that he has to pay to complete the lease or until they get a new tenant. But you said he should just tell them he's not going to pay and they should just cut the loss.

          Maybe you should indicate to the agent that it is going to be really hard to extract money out of you and the landlord shouldn't count on getting the full term out of you without expensive court costs.

          The REA have advertised as they have to do. They have had no interest (even the interest OP got through facebook have not been passable). What do you propose them to do to get more interest? Lower the rent? Why, they have a contract saying OP will pay the rent. He's not facing hardship as he just purchased a house. This isn't the big bad real estate screwing the little guy.

          • Quantumcat on 16/09/2020 - 19:21

            @dizzle: My comment about the landlord not having any motivation to get a new tenant was about the general case rather than OP-specific. The general case may have some people in hardship circumstances. Even if the market was good the landlord could ask higher rent or reject every application because there's no urgency to get a new person. At least in ACT there is a default number of weeks that's the maximum a tenant would have to pay, so the landlord has to at least consider average applications and not wait for unicorns and have a realistic rent. Even if OP goes to maximum effort to advertise and show the property on their own the landlord could just reject every application that comes of it, since he could have all the rent with no renter (no maintenance requests, no wear and tear etc).

            • Extreme on 17/09/2020 - 13:34

              @Quantumcat: That falls back on the OP.

              You’ll find that break lease terms are outlined within a lease agreement.

              The OP would have known the terms of what is required by them should they wish to break lease.

  • elgrande on 16/09/2020 - 16:50
    +3

    Should have just stopped paying rent so they can evict you.

    • stirlo on 16/09/2020 - 17:08
      +1

      This might actually work? Despite being very immoral obviously…

  • Cartman2530 on 16/09/2020 - 16:52
    +1

    Do you know anyone that can take over the lease for you? If they do that it should be alright as the landlord is still getting paid.

    • Quantumcat on 16/09/2020 - 18:36
      +1

      Landlord still has to approve the new person

      • Cartman2530 on 16/09/2020 - 20:51

        True, but at this point if they help out the landlord by trying to find someone else, the landlord might be appreciative and it might work out good for both parties.

        Alternatively, they could go the nuclear option and just not pay rent to get evicted.

    • barga in on 17/09/2020 - 11:27

      I wish I did :-(

  • stirlo on 16/09/2020 - 17:10
    +2

    Easiest thing to do would be to drop the rent a bit below market rate to get it rented faster and offer to pay the difference until the lease is up. Otherwise with economic conditions as they are you might pay lots more especially if you're currently paying an above market rate.

  • dizzle on 16/09/2020 - 17:45
    +4
    1. Can I rent the house I bought instead - no, as the family is really keen to move in there

    Yes but I (and my family) don't want to - Corrected

    Just because they are keen to move in doesn't mean you have to.

  • AustriaBargain on 16/09/2020 - 17:53
    +1

    as the family is really keen to move

    How is their keenness a barrier for you doing what might need to be done to save the budget? Do they have psychic abilities, if they hone their keenness can they stop your heart or curse you or something similar?

  • Quantumcat on 16/09/2020 - 19:23
    +1

    If you're going to have to pay rent anyway maybe sublet the rooms?

    • penting on 17/09/2020 - 07:51

      You'll need the REA approval to do this. Also OP will be held responsible for any damages.

      • Quantumcat on 17/09/2020 - 07:53

        Yeah that's true, the risk is probably not worth it.

  • Seraphin7 on 16/09/2020 - 19:27
    +1
    1. Can I rent the house I bought instead - no, as the family is really keen to move in there

    The family might need to readjust their expectations for a little while.

    Sometimes you get served a sh1t sandwich and you just have to eat it. How you choose to eat it is up to you, but it doesn't change the fact that it's got to be digested. Not everything in this world can "just be gotten out of".

    • barga in on 17/09/2020 - 11:27

      I am going to consider that option and try to manage expectations, thanks for the suggestion

  • snooksy on 17/09/2020 - 09:23
    -1

    Why don't you move out, take the keys to the landlord then stop paying rent. Then you can negotiate with the owner/agent a compromise for say X number of months. If all your possessions are out of the property and you have returned the keys then you are in a better bargaining position. If they take you to court over breaking contract then you'll probably end up settling outside court anyway. The fees and delay for court hearings at the moment due to covid will be significant.

    If you have purchased a property then it's very unlikely you will be in the rental market again for the foreseeable future so any leasing history you have is not important. In saying that, and as others have pointed out, you purposely broke a lease by purchasing a house with a settlement date while you were under contract to pay rent on another property. You broke the rules so somewhere along the way you have to accept responsibility for your actions. If you were in the market to purchase a property then you should not have signed a long lease and you should have gone month to month on your last lease renewal. It won't look good to VCAT / a court appointed referee that you purchased another property because you can't claim you didn't have money to pay the rent. You just didn't plan properly. If you had gone month to month then this would be forewarning to the agent and the landlord that you were planning on moving out.

    If you want to rent out the new property then be prepared to sign a 6/12 month lease with the new tenants and also beware that any stamp duty concessions you might be getting as a first home buyer will be voided if you rent out the new property. You can't expect the new tenants to want to move in their only for a couple of months then move out again. You can only get FHOG (bonuses/grants) if you actually move into the property for the first 12 months and don't rent it out. For what it's worth, I don't think it's the right solution to rent it out to another person. This seems like it will be more hassle than it's worth.

    • barga in on 17/09/2020 - 11:29
      +1

      The process before Court is VCAT and that is not costly from fees point of view. It certainly is time consuming. Not sure I want to go down that path as it can be mentally draining.

  • barga in on 17/09/2020 - 11:33

    Thinking of another scenario here - What if I rent out the new house I bought for 6 months, can the tenant refuse to move out? Currently there is a rental eviction moratarium until 31st Dec, but can always be extended. Would I qualify to get the tenant evicted as the 6 month lease is coming to end?

    • Quantumcat on 17/09/2020 - 13:06
      -1

      You can give them normal notice to leave. The eviction moratorium is only for people that can't afford their rent due to being affected by covid, during their lease

    • Extreme on 17/09/2020 - 13:58

      Yes they can refuse to move out. If they do so, you’d need to apply to vcat for possession orders.

      And if they’ve got nowhere else to live, obtaining these possession orders can be a somewhat long and drawn out process.

      • barga in on 17/09/2020 - 14:53

        So another nightmare scenario. Damn.

        • dizzle on 17/09/2020 - 20:53

          Not likely to happen unless you don't do your due diligence in vetting them. If that happens you probably had other issues before hand like not paying rent on time.

          • Extreme on 18/09/2020 - 08:26

            @dizzle: You’ve got no possible way of knowing wether it will happen or not.

            People’s circumstances can change from the time they apply for the lease, to the time it ends.

  • barga in on 17/09/2020 - 15:00
    -5

    I spoke to TenantsVic today (thanks @thatonethere) and their advice was:

    1) I need not pay rent after the day I vacate. It is up to the landlord/ agent to claim that money, can try directly or they can go to VCAT
    2) VCAT may decide to compensate the landlord for some amount, which is usually up to 8 weeks from the notice date, which will be in my case. Can possibly extend to 12 weeks in current market. In worst case scenario, I have to pay all.
    3) don't incentivise by continue paying them.

    Thank you all.. I have chosen to go down this path and have notified the agent that I will be paying upto my vacation date only.

    I will keep you posted as the things pan out.

    • ykwon10 on 17/09/2020 - 15:15
      +3

      I find this hard to believe and considering coming from TenantsVic, disappointing advice. What is the purpose of having an agreement then if someone can just decide to break the agreement without much repercussion?

      • 82norm on 17/09/2020 - 19:48
        +1

        Yeah, do the crime, but not do the time. Sorry OP YOU FU big time, take responsibility and do the right thing. How do you not know you’re now putting the Landlord under financial stress?

        Why would VCAT compensate the Landlord? You may want to get that in writing, sounds like croc to me.

    • miwahni on 17/09/2020 - 21:41
      +1

      I'm surprised you were given this advice and it's a really slack action to take.

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