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WHEN A TENANT BREAKS A FIXED LEASE TERM

A property lease is essentially a legal and binding agreement between a tenant and landlord.  As part of the contract, the tenant agrees to rent the landlord’s property for a fixed term, usually six or twelve months. If the tenant subsequently wants to terminate the lease before one fixed term has expired, there are potential costs to be considered.

In most cases, the tenant is liable to pay rent until suitable replacement tenants can be found, as well as a percentage of the landlord’s re-letting costs. As an example of calculating the re-letting costs, if the tenant were to break the lease halfway through the fixed term period, they would pay 50% of any re-letting fee payable to the agent (usually equal to one week rent) as well as 50% of any marketing costs.

By law, the landlord or their agent has to do everything they can to try to find a new tenant as soon as possible while minimizing the vacating tenant’s costs. If the landlord does anything to make it harder to find a replacement tenant, like increasing the rent or unreasonably rejecting potential tenants, the vacating tenant may not have to pay the full amount requested. If there is a dispute over the amount charged, it will usually be adjudicated at the Consumer, Tenancy and Trader Tribunal.

There are only a few ways a lease can be broken without financial penalty to the tenant. The most common is if the landlord fails to keep to the terms of the lease, like not performing essential maintenance or repairs. If the breach is serious, the tenant can give 14 days’ notice or apply to the tribunal.  If the landlord disagrees with the branch, they can take the tenant to the tribunal.

The tenant can also give 14 days’ notice if the landlord puts the property up for sale during the fixed term tenancy and the tenant was not told before originally signing the lease.

Of course, if the tenant and landlord mutually agree, the lease can be broken without penalty to either party. Ideally, it’s best for the tenant to give as much notice as possible if breaking their lease, to allow for the best chance of finding a new tenant quickly and minimising either party’s loss.

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