Ending a Tenancy

Contributed by Peter Christensen and Tenancy Advice Service (a division of Legal Aid ACT) and current to March 2020.

Ending a tenancy and breaking a lease

The Residential Tenancies Act 1997 (ACT) ('the Act') permits a tenant to leave a tenancy in various circumstances, including:

1. at the end of a fixed term on giving 3 weeks' notice (oral or written);
2. any time during a periodic tenancy on giving 3 weeks' notice (oral or written);
3. when there is agreement between the lessor and tenant for the lease to end;
4. upon giving 2 days’ notice if a premises is not fit for habitation (though this can be challenged by the lessor);
5. when authorised by the ACT Civil and Administrative Tribunal (ACAT) on the basis of 'significant hardship';
6. when authorised by the ACAT on the basis of a breach of the tenancy by the lessor;
7. when authorised by the ACAT in connection with a personal protection order or family violence order;
8. if permitted under a ‘posting clause’;
9. if the tenant is accepted into a residential aged care facility or social housing dwelling on giving 14 days written notice;
10. after giving 14 days’ notice under certain circumstances relating to the sale of the premises by the lessor (see ‘During a Tenancy’);
11. when authorised by the ACAT because the lessor has, or is likely to, cause or permit serious danger or injury to the premises, the tenant, the tenant’s family or the tenant’s property;
12. when authorised by the ACAT because the lessor induced the tenant to enter into the lease through a false or misleading statement;
13. when the lessor intends to increase the rent and the tenant has given three weeks’ notice; and
14. if a tenant is in a COVID-19 impacted household on giving 3 weeks’ notice.

COVID-19 NOTICE :The Residential Tenancies (COVID-19 Emergency Response) Declaration 2020 (No 3) is currently in force and is set to expire on 30 April 2021. This declaration allows tenants in a COVID-19 impacted household to terminate a lease without paying compensation to the lessor if certain criteria are met. For more information, see the Tenancy Advice Service Tenancy and COVID-19 factsheet.

Leaving a tenancy otherwise is known as 'breaking the lease'.

Under the Act, in the absence of a specific break lease clause, a tenant is required to pay rent until a new tenant is found (limited to the end of the fixed term or 25 weeks, whichever is the less) and up to 1 week's rent to cover the advertising costs of the lessor in attracting new tenants. The advertising costs cannot include administrative costs such as drafting a new lease.

However, there is also an obligation on both parties to mitigate their losses - that is, to take steps to reduce the amount of damages that arise from the breach. This includes the lessor advertising for a new tenant promptly, properly considering all applicants and the tenant making the property available for new tenants to inspect.

The first thing a tenant needs to do when thinking about breaking the lease is to check their tenancy agreement. Some tenancy agreements may include different versions of an optional 'break lease clause'.

A break lease clause puts a cap on the amount of rent a tenant has to pay. The most recent break lease clause in s 8 of the Act (which became an option from 1 November 2019) caps the compensation payable by the tenant to 6 weeks rent if the lease ends within the first half of the fixed term, and 4 weeks rent if the lease ends in the second half of the fixed term, with either amount being reduced if a new tenant can be found.

A tenant considering breaking their lease should approach the lessor or agent as early as possible to see if some agreement can be reached. It may be, for example, if the tenant cooperates, a new tenant can be found to take over the tenancy immediately upon the tenant vacating.

Moving Out

When a tenant moves out, either with the appropriate notice or when breaking the lease, the lessor should arrange a final (or check-out) inspection with the tenant present.

Prior to the final inspection the tenant should remove all their belongings,and return the premises in substantially the same cleanliness and condition as it was in prior to the commencement of the tenancy, with the exception of fair wear and tear.

At the inspection the parties should go through the original condition report and try and agree on what cleaning or repairs are necessary. If an agreement is reached the agreement should be recorded in writing. This could include things like:

• "Tenant to get cleaner to come back and clean bathroom"; or
• "Tenant agrees to release $XXX from the bond for lessor to carry out further cleaning".

If there is no agreement, the tenant should lodge their own bond refund form with the ACT Revenue Office.

When only some of the tenants want to move out

Before 3 March 2021, if a co-tenant wished to stop being party to a residential tenancy agreement (colloquially known as ‘moving out’), the residential tenancy agreement would come to an end. A final inspection and bond refund would then be necessary.

On 3 March 2021, new amendments to the Act became effective, allowing for co-tenants to move out without causing the residential tenancy agreement to end for the remaining co-tenants - provided that the lessor and co-tenants all consent to this course, or the ACAT so orders.

A co-tenant seeking consent to move out must do so by giving at least 3 weeks’ written notice to each co-tenant and the lessor.

If a remaining co-tenant refuses to provide consent, there is no method for the departing co-tenant to compel consent to be given. However, it always remains open to a co-tenant to end a lease through any other lawful channel as described above (e.g. by giving 3 weeks’ notice in a periodic lease).[DS1] [DY2]

A lessor is entitled to unreasonably refuse consent to such a request if it concerns a fixed lease. However, if it is a periodic lease, a lessor cannot unreasonably refuse consent.

If the lessor does not respond to the co-tenant’s request to leave a lease within 21 days, the lessor is taken to have consented to the request.

The effect of a co-tenant leaving a lease is that the departing co-tenant’s rights and obligations under the lease come to an end.

As a lessor will no longer be required to conduct a final inspection when only some of the co-tenants in a lease move out, this obligation now falls upon the remaining co-tenants. The remaining co-tenants should conduct an inspection and review the financial arrangements of the household to consider whether the departing co-tenant will create any liability for the remaining co-tenants (e.g. damage to property or unpaid utilities).

When a co-tenant leaves the lease, the remaining co-tenants must pay the departing co-tenant their share of the bond, minus any reasonable costs (e.g. any amounts identified as a result of the tenants’ inspection described above), and notify the ACT Revenue Office of the payment.

Lessor terminating a tenancy

Failure to pay rent

If a tenant fails to pay rent within 7 days of when it is due, the lessor may serve a Notice to Remedy on the eighth day after the rent was due.

A Notice to Remedy must tell the tenant that if all rent is not paid within 7 days of the service of the Notice to Remedy, the lessor may serve a Notice to Vacate. The lessor must also state that, if the rent is brought up to date in this time, no further action will be taken and the tenancy continues.

If a tenant can't bring the rent up to date within the timeframe provided in the Notice to Remedy, they should contact the lessor and negotiate a payment plan to avoid receiving a Notice to Vacate.

COVID-19 NOTICE: The Residential Tenancies (COVID-19 Emergency Response) Declaration 2020 (No 3) is currently in force and is set to expire on 30 April 2021. This declaration provides that, if a COVID-19 impacted household has outstanding rent arising from between 22 April 2020 and 22 October 2020, the tenants cannot be evicted for a failure to pay the outstanding rent for that period if the tenants continue to pay rent between 23 October 2020 and 30 April 2021 as it becomes due. For more information, see the Tenancy Advice Service Tenancy and COVID-19 factsheet.

Other breaches of the tenancy

For a breach of the tenancy agreement other than a failure to pay rent (e.g. failure to maintain the property or causing a disturbance), the lessor must a give a Notice to Remedy setting out the breach, specifying what must be done to remedy the breach and giving the tenant 14 days to do so. The Notice to Remedy must state that if the breach is remedied the tenancy will continue but, if not, the lessor can serve a Notice to Vacate.

The Notice to Remedy must give the tenant sufficient information to understand on what basis the Notice to Remedy has been issued, allow them to understand exactly what must be done to remedy and allow them to defend it if necessary. A mere recitation of the tenancy agreement clause allegedly breached is unlikely to be sufficient.

Notice to Vacate – Breaches

A Notice to Vacate can be issued following the expiry of a Notice to Remedy, or if the lessor has already served two Notices to Remedy on the tenant.

A Notice to Vacate must give the tenant at least 2 weeks to vacate.

Notice to Vacate - no breach

A lessor can serve a Notice to Vacate without any grounds provided the notice gives 26 weeks’ notice.

The lessor can also serve a Notice to Vacate in a periodic tenancy on the following grounds:

1. If the lessor, or an immediate relative of the lessor, or another person who the lessor has obligations to house genuinely intend to live in premises - 8 weeks. A statutory declaration attesting this intention must be given;
2. If the lessor genuinely intends to sell the premises - 8 weeks; or
3. If the lessor genuinely intends to reconstruct, renovate or make major repairs to the premises - 12 weeks.

Defending a Termination and Possession Order

Once a Notice to Vacate has expired, and if the tenant has not vacated the premises, the lessor may make an application to ACAT for a 'termination and possession order'.

Applications to terminate a tenancy are listed for a hearing (rather than a conference), meaning the matter may be finalised on the first day the Tribunal hears the matter. It is therefore important to thoroughly prepare before this by carefully reading the lessor’s application for a termination and possession order, and preparing a response. The tenant’s response should set out the tenant's side of the story and what happened and should happen from the tenant's perspective. If there is evidence to support the tenant's side (e.g. medical certificates, reports, etc.), they should be attached to the response and filed with the Tribunal.

The following points are worth considering in preparing a response to a breach application:

1. did the tenant receive the Notice to Remedy and Notice to Vacate;
2. are the allegations in the Notice to Remedy true;
3. were steps taken to remedy as required by the Notice to Remedy;
4. does the breach justify the termination of the tenancy;
5. if the breach relates to payment of rent, have arrangements been put in place to pay the arrears;
6. what offers can be made to pay off the arrears; and
7. will the tenant suffer hardship if the tenancy is terminated.

In the case of rental arrears, ACAT has an option to make what is known as a payment order instead of terminating the tenancy. The effect of a payment order is that the tenant is required to make specified payments against arrears, and in the event of default in payment the lessor may apply to ACAT for a termination and possession order.

The following points are worth considering in preparing a response to an application to end a lease that’s not due to the fault of the tenant:

1. did the tenant receive the Notice to Vacate;
2. are the allegations in the Notice to Vacate true (e.g. is there evidence that the lessor intends to move back in);
3. what special hardship will the tenants suffer if the eviction is granted, including:
   1. does the tenant have children who will be affected, including having to change schools;
   2. does the tenant have a disability or specific requirement to be in a particular area (e.g. close to medical facilities).

It is important to remember that ACAT has a discretion not to make a termination and possession order.

Eviction

An eviction can only take place following an ACAT Termination and Possession order and a warrant issued by ACAT. Only police are allowed to carry out evictions. If you are a tenant and your lessor tries to evict you on their own, call the police immediately.