Break Lease Situations

29 Oct 2016

What you need to know

Currently the rental market in Brisbane is going through a soft period which in turn has seen a decline in weekly rents throughout most suburbs. So why is the rental market going through this rough patch? 

  1. The rental growth and price growth of a property  don’t usually move upward direction at the same time, currently Brisbane property prices are on the rise which has resulting in an softening of the rental yields. 
  2. Interest rates are very low so many people are in a position to buy which takes renters out of the market.   
  3. Over supply of units- people who would normally rent a house are considering renting a unit/apartment, as the oversupply has meant huge rent reductions and special offers to entice tenants such as Free Ipads or w weeks rent free with any 12 month lease.   

This is having a ripple effect across the entire rental market including properties that are currently tenanted. Over the last few months we have seen an increase in the number of tenants breaking their lease early. Across our property management division we would normally only have a tenant breaking a lease every 3-4 months or so, this has now increased to every few weeks! 

This is happening across the state and last month the RTA/QCAT sent an email to all property managers, lessors and tenants, reiterating what the obligations are should a tenant chose to break their lease.  

Below is a summary of what you need to know and how the Hot Property Management team look after this process for our clients: 

Loss of rent 

  1. Did the lessor/agent act quickly to advertise the premises?  Once we have written confirmation from the tenant of their intention to break the lease the tenant is issued with and overview of the process moving forward and we liaise with the owner and inform them of the situation. From there we start the advertising process, the property is placed on the market listed via real estate listing websites but also marketed via Social media to expand the properties exposure.  
  2. Was a new tenant found within a reasonable time? The team implement various strategies try and secure a replacement tenant in the shortest possible time. Due to the soft rental market this can be challenging, but given our unique marketing strategy of our owners property, we find that new tenants are being secured in reasonable time frames.
  3. If necessary, did the lessor reduce the rent in line with market conditions? In some situations the rental market is lower than when the property was rented 12, or even 6 months ago so after a reasonable time of attempting to obtain the same rental figure we assist with adjusting the rental to current market conditions.  
  4. Did the lessor unreasonably reject prospective tenants? This is easily managed by Hot Property Management we have a in depth process of evaluation that all tenants are subject to, outgoing tenants are kept up to date with any applications from prospective tenants to show we are acting reasonably.
  5. If the premises could not be immediately re-let (e.g. because of damage), did the lessor repair the damage within a reasonable time? This is easily managed by Hot Property Management, due to our regular routine inspections and proactive nature to presentation and maintenance this isnt usually an issue with our clients. 

 

Advertising and re-letting fees  

When a tenant signs the General Tenancy Agreement all of this information is thoroughly outlined.  

  1. Are the advertising expenses reasonable? This is a charge to the tenant this cost. We charge the tenant a $99 fee to cover the out of pocket cost to re-advertise the property.  
  2. Is the break lease fee reasonable? Yes, the one weeks rent plus GST which the owner receives to cover their costs. 

 

Unpaid water or utilities bills 

  1. Does the lease state that the tenant must pay the lessor for water or utilities? Yes, we ensure this is stipulated in all leases.  
  2. Are the premises water efficient? Yes we encourage all properties to be water efficient.  
  3. Did the lessor give bills to the tenant within a reasonable period of time since receiving them? Yes we ensure we provide adequate time when issuing bills.  

 Damage to property  

This is not a concern as to date, if there was any we would act immediately whether the tenant was vacating or not. 

One important element to point out is that if a tenant vacates a property by breaking their lease early, they are required to continue to pay rent until a replacement tenant has been found.   

However, we do need to be mindful of the rent and do all we can to find a replacement tenant. Due to the current rental market we have discussed with our lessors the need to consider a small reduction to the rent for the property. This is a last resort but we need to ensure the property meets the market value. If this is not duly considered, then the tenant may be able to lodge a claim with the RTA/QCAT as not all reasonable steps have been taken to mitigate their loss. If the lessor is not seen to be taking necessary steps, then QCAT may release the tenant from paying rent and other costs.  

We are currently working closely with a number of property owners to ensure all reasonable steps are taken to have their property tenanted as soon as possible.  

If you have any questions or concerns regarding this subject, or would like Hot Property Management to assist you with your investment property then please contact us on 07 3170 3760.  


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