A runaway tenant is a challenge faced by commercial and residential landlords, particularly during a pandemic. There are many possible reasons for tenants to behave in this way. Over the past two years, commercial tenants have been significantly impacted by government restrictions, which have lead to staff shortages and reduced foot traffic. Whereas residential tenants are confronted with a rise in unemployment and reduction of work hours.
In January, the New South Wales government extended the National Code of Conduct for commercial tenancies for another two months, giving rent waivers and deferrals to commercial tenants. Arguably, this measure curbs the risk of runaway tenants.
To better protect the interests of the landlord, this article will examine the mechanism of a break fee and other legal remedies. Each state and territory of Australia has its own unique laws on tenancies and property abandonment. Therefore, complying with these laws will assist the landlord with re-renting the property and recovering lost income quickly.
When a tenant signs a fixed term lease, they are committing to stay for the full term. If a tenant intends to move out before the end of the fixed term, the tenant will likely incur a break fee, being a penalty. Mandatory break fees may apply based on how many months have elapsed since the commencement date.
For leases of three years or less, the set break fees payable are:
– four weeks rent if less than a quarter of the agreement has expired.
– three weeks rent if a quarter or more but less than half of the agreement has expired.
– two weeks rent if half or more but less than three quarters of the agreement has expired.
– one weeks rent if three quarters or more of the agreement has expired.
The landlord can also make a claim against the bond if the tenant breaks the lease early.
Our law firm has witnessed many outdated leases that do not prepare for tenants who break the lease early. Contact our property team today to ensure that your lease thoroughly protects your interests.
Remedies at common law
Ideally, every tenant will pay rent on time for the full duration of the Lease and provide proper notice to the landlord before moving out. However, what can you do if the tenant leaves the keys behind with outstanding rent?
At common law, failing to pay rent on time entitles a landlord to terminate the lease because it is a breach of an essential term.
If the breach is not capable of being remedied or rectified, the landlord can ask for reasonable monetary compensation. One cost-efficient solution to claim compensation is to write a letter of demand to the tenant. Our article here summarises the content and effect of a letter of demand.
If the tenant does not respond, then you can draw and file a statement of claim in court. The jurisdiction of the court depends on the size of the claim.
Therefore, it is very important to be aware of the legal remedies available to a landlord when a tenant fails to pay rent. The landlord can seek a break fee, which can be recoverable from the bond. Furthermore, the landlord can terminate the lease and even seek compensation by way of letter of demand or a statement of claim. If you are experiencing a difficult time dealing with a tenant who is likely to not pay rent, then contact our experienced property law team for advice. Time is of the essence to maximise your chances of recovering unpaid rent.
This publication provides general information of an introductory nature and is not intended and should not be relied upon as a substitute for legal or other professional advice. While every care has been taken in the production of this publication, no legal responsibility or liability is accepted, warranted, or implied by the authors or our firm, and any liability is hereby expressly disclaimed.
Ge Wu is the solicitor director of Legal Point Lawyers & Attorneys. He has been admitted to practise law since 2005. Throughout his practice, Ge Wu predominantly practises in the areas of Property Law, Immigration Law, Commercial Law, Civil Litigation and Family Law.
His experience covers all aspects of property law, commercial/retail lease, immigration law and civil litigation, while at the same time, he also has experience in family law, criminal law and other areas such as will-drafting and general advice.
He has frequently been instructed by corporate clients in pre-acquisition due diligence reports, structuring property development, land/shopping centre acquisitions, G.S.T. and stamp duty advice for buying/selling businesses, as well as share transfers and company re-structures.
Ge Wu has been appointed as Notary Public since 2011 and started to provide Notary Public service to clients from different cultural backgrounds.