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Can you break a lease when you buy a house?

There’s more to it than you think
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Are you looking to break your lease early and buy a home? Or, wondering if it’s possible to get out of your lease agreement when you have 4 months of a 12-month contract left?

In this post we will go through the steps of ending your lease early and we will also give you 4 ways to break your lease without any penalties.

Contents

What costs do I need to pay when breaking my lease?

What does breaking the lease mean?

A lease is a legally binding agreement, and if a tenant breaks the lease before the end of the lease term (referred to as the fixed term agreement) without sufficient reason, they are breaking the lease. This is also referred to as breaking the rental agreement. The bad news is that if a lease agreement is broken, compensation may need to be paid to the owner or property manager until the end of the original rental agreement or until the property is leased out again because there could be some loss of rent. The good news is there are a few ways to manage this.
 

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You might have bought a home, but how do you break a lease? There are things you can do to minimise the costs and troubles involved.


 
Usually, a homebuyer will break a lease when they have found the perfect home to buy, and are ready to go, but unfortunately they realise they still have 2, 3 or 6 months left on their lease term.

Under the lease agreement if you leave the rental property with 2 months left on your lease, you technically owe the owner or property manager for those 2 months rental even if you aren’t living there.

It is possible to have a rental agreement terminated immediately if:

  • The landlord and tenant agree in writing to end the agreement.
  • The sole tenant of the premises dies.
  • The property owner’s mortgage company gives notice.

 
rental-termination
 
Realistically, first home buyers only have option 1 available to them if they want to break the lease without paying some form of compensation. But we will cover more of the costs below.

People break leases all the time, so if you need to break your lease, don’t worry, it’s completely doable.

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What are the steps for breaking my lease?

  1. Notify the property manager, in writing, of your intention to leave.
     
    In nearly all cases, if a landlord wants to kick you out and terminate the rental tenancy they will need to let you know in writing. It’s the same case if you are wanting to break your lease. Put in a Form 13 Notice of Intention to leave ASAP and send it to your property manager. The sooner you do this, the better.
     
    Breaking lease RTA-notice-of-intention-to-leave-form13
     
    According to the Residential Tenancies Authority of Queensland (RTA), a tenant gives the Notice of Intention to leave to a property manager/owner when they want to vacate the property by a certain date and should use this form:

    • To end a periodic agreement (i.e. if you’re paying month to month).
    • To end a fixed term agreement (i.e. if you have X months left on your lease).
    • If they have grounds to end a fixed term agreement early, or if they are breaking the lease.
  2. Leave the property on, or before the proposed date.
     
    You have to be super-organised because there are a lot of things to do before you leave. Here are some of the things you need to do before leaving the place you are renting:

    • Arrange a bond claim.
    • Get a professional cleaner. If you pay for professional services to do the cleaning and have a receipt, the landlord or property managers cannot claim anything extra from you for cleaning.
    • Get pest control, if applicable.
    • If the garden is overgrown, you need to sort it out.

    Basically, you are getting the property into the shape you found it in. Leaving on or before the proposed date, and making sure the property is in ship-shape condition before you do, means that the landlord or property manager can get someone in there as soon as possible and that will save you money.

  3. Take lots of photos of the property.
     
    So many times, people lose their bonds because they didn’t take photos and are accused of leaving dirty showers or grime under the sinks. So, take photos to show that the place has been cleaned. If you clean the backyard, take a photo. You never know, there could be a storm overnight and you could get blamed for something you didn’t do. We cannot stress this enough – take photos!
  4. Fill and complete the exit condition report.
     
    This is called the form Form 14a. You can fill this out with your Property Manager or just fill it out on your own. Once done send this form to your Property Manager.
  5. Fill and complete the Refund of Rental Bond (Form 4)
     
    Once you have completed the exit condition report, fill in the Refund of Rental Bond form and send it to the Property Manager to sign to be lodged.
     
    how to break lease RTA-refund-of-rental-bond-form4__1
     
    Download our break lease checklist here.

    When is my tenancy agreement terminated?

    Legally speaking, the lease is not broken until you have given back vacant possession of the rental property – in other words, you’ve completely moved out.

    If you believe you have been placed under excessive hardship by the property manager or owner, you can also apply for excessive hardship through the Queensland Civil and Administrative Tribunal (QCAT) provided you have evidence to support your application. QCAT can then issue a termination order which may exempt you from paying the landlord or property agent any rent or compensation or any fee from the day the termination order is issued.
     

    dont pay rent anymore

    Once you have broken your lease you’ll be a homeowner! No more paying rent!


     

 

What costs do I need to pay when breaking my lease?

According to the Residential Tenancies Association (RTA), when breaking a lease, you may be required to pay some of the following costs:

  • Reasonable re-letting costs—usually 1 week’s rent plus GST.
  • Reasonable advertising costs, if incurred.
  • Compensation for loss of rent until a new tenant is found or until the end date of the agreement, whichever happens first.

 
Cost required
 
The property manager or owner is legally required to minimise the costs associated with breaking the lease. If at any time you feel they are not mitigating this loss, contact the RTA for help.

What could these costs potentially look like?

Let’s say you’ve found the perfect home but have 2 months left on your lease and your rental is $500 per week.

Worst case scenario you may be required to cover:

  • Reasonable re-letting costs = $500 (I week’s rent).
  • Reasonable advertising costs = $100.
  • Compensation for loss of rent if It took 4 weeks to find a new tenant = $2,000 (4 x $500 ).

So it could cost you an extra $2,600 in rent to break your lease early to buy a home.
 

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If you are thinking about breaking your lease after you’ve bought a home you want to tell your property manager as soon as possible to give them time to find another tenant.


 
Remember, if the property manager and tenant mutually agree, the tenancy agreement can be terminated at any time. So, these figures are the worst case, but it’s worth having a chat with your property manager to see what you can work out.

 

What are some ways you can break the lease without costs?

Here are some tips on how you can break the lease with no costs

  1. Check for a break of contract.
     
    As part of your lease, the property owner agrees to maintain the property and provide a safe environment. Unfortunately, not every property owner lives up to their side of the deal, and if they ignore requests to fix broken appliances, sort dodgy plumbing or if there is mould or insect problems you could say they have breached their lease contract.This is one of the very few cases where having a dodgy landlord can actually be a good thing as it will allow you to break the lease without costs.

    However, this area is a bit tricky and it depends on the situation. If you are renting a normal property with a reasonable landlord, it’s not an easy way to get out of your lease, but if you’re living in some sort of a den or something terrible, then this could work for you.

  2. Find a replacement tenant.
     
    Although you might not be allowed to sublet the property, you can try to find another tenant to replace you and take over the lease. If you know any mates looking for a place to stay, then you might have an easy fix! When you buy a home it usually takes at least 45 days from the day of signing the contract of sale to you being able to move in – so you have at least 6 weeks to find another replacement tenant.
  3. Talk to your landlord or property manager.
     
    If you can agree to terminate the tenancy with the property manager on a mutual basis, then you can break your lease without any cost at all. it’s always worth discussing this with the property manager – you never know, they might be planning on moving into the property or giving it to a family member or even looking at selling. it doesn’t hurt to ask – the worst they can do is say no.

    Sometimes you might not be able to bring down the cost to nothing but you can minimize the costs in the following ways:

    • You want to let the property manager know as soon as possible of your intention to leave the property. This will give them lots of time to find a new tenant. If you have any friends looking to rent, you could help the property manager find a replacement tenant to minimise any costs associated with breaking your lease. The less time the property manager spends looking for a new tenant, the less you have to pay in compensation for lost rent.
    • Reducing advertising costs. You should only be expected to contribute a reasonable amount for advertising costs, depending on how much time you have on your lease. What this means is, if you have 50% of your lease left, say you are 6 months into a 12-month lease, you should only pay 50% of the advertising fee. If you have 3 months left on a 12-month lease you should only pay 25%, etc.

 
Download our break lease checklist here.
 
Free checklist

 

Next steps from here to buy your first home

Our team at Hunter Galloway is here to help you make your home journey easy.

Unlike other mortgage brokers who are just one person operations, we have an entire team of experts to help make your home loan journey as simple as possible.
 
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If you want to get started, please get in touch here and we can book a time that suits you – either a phone call information session or a face to face meeting at no cost to you.

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