Can you break a lease when you buy a house?

Looking to break your lease early to buy a home? Say you are 4 months into a 12-month lease and your circumstances have changed and now you want to buy a home.

If you would like to break your lease early to get into a new home you have found the right article, we go through your options step-by-step and let you know what you can (and can’t) do when ending your lease early.

Plus we look at 4 ways to avoid breaking the lease without any penalties.

Contents

What does breaking the lease look like?

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 which is a legally binding agreement.

The bad news is that if this is broken, compensation may need to be paid to the owner (or property manager) because you are looking to break the lease and there could be some loss of rent until the property is leased out again – or until the end of the original rental agreement.

The good news is there are a few ways to manage this.

Practically breaking the lease usually looks a home buyer who has found the perfect home to buy, and is 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 left the rental property with 2 months on your lease you technically owe the owner (or property manager) those 2 months rental even if you aren’t living there.

break a lease when you buy a house

How to break a lease when you buy a house?

How do I tell the property manager about breaking the lease?

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. And it’s the same case if you are wanting to break your lease.

As a tenant, if you want to notify the landlord of your intention to leave, complete a Form 13.

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)  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.

Once you have completed your Form 13, shoot it off to your property manager (or property owner) for them to process.

How does breaking the lease work?

It is possible to have a rental agreement terminated in a few different situations, including if:

  • The landlord and tenant agree in writing to end the agreement
  • In the death of a sole tenant of the premises (doesn’t help many first home buyers).
  • The mortgagee gives notice (i.e. the property owners mortgage company).

Out of the 3 options above, realistically first home buyers only have number 1 – agreeing with the landlord over breaking the lease to avoid having to pay compensation.

Do I need to pay any costs when breaking my lease?

Worst case scenario, you may be required to pay some of the following costs but there are a few things you can to do help mitigate these.

According to the RTA, you may be asked to pay:

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

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

What could these costs potentially look like?

Let’s run with the above scenario, you’ve found the perfect home but have 2 months left on your lease which costs $500 per week.

Worst case scenario you may be required to cover:

  • Reasonable re-letting costs – 1 weeks rent = $500
  • Reasonable advertising costs = $100
  • Compensation for loss fo rent = It took 4 weeks to find a new tenant 4 x $500 = $2,000

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

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

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.

  1. Reducing advertising costs – Can also be reduced as you should only be reasonably expected to contribute to the advertising costs. 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.
  2. 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 inspect problems you could say they have breached their lease contract.
  3. Find a replacement tenant – Although you might not be able 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 sweet place to stay then you might have an easy fix!
  4. Get it moving ASAP – 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.

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

What are the steps for breaking my lease?

It’s not the end of the world to break a lease, and there are a bunch of ways to reduce the costs of having the place leased. This is very common at the moment so don’t worry.

  1. Put in a Form 13 Notice of Intention to leave form ASAP and send to your property manager.
  2. Leave the property on, or before the proposed date and arrange a bond exit cleaner to do the cleaning, pest control if required and carpet clean if applicable. It’s best to get this done professionally and try to get all of your bond back. Provided 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.
  3. Take lots of photos of the property after cleaning has been done when you leave to show it was spick and span.
  4. Fill and complete the exit condition report which you can fill out with your Property Manager or just fill it out on your own, Form 14a. 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 and send to the Property Manager to sign to be lodged.

When is my tenancy agreement terminated?

Legally speaking, the lease is not broken until you have given back vacant possession of the rental property – i.e. 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 QCAT provided you have evidence to support your application.

Next steps from here to buy your first home

Our team here at Hunter Galloway is here to help you buy a home in Brisbane. Nathan & Joshua Vecchio are Senior Mortgage brokers who specialise in making your home journey easy.

Unlike other mortgage brokers who are just one person operators, we have an entire team of experts to help make your home loan journey as simple as possible.

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 (which doesn’t cost anything for you)