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The Landlord's Guide To Renting

Part 3 - How to end a Lease
 

All leases must come to an end.

A landlord gives notice because they are unhappy with the tenant or want the house back.

A tenant gives notice because they wish to live elsewhere.

In this newsletter, we look at how a landlord ends a lease.


To end a lease, landlords and tenants must give a Notice to Terminate. This notice was known as a Notice to Quit or a Notice to Vacate or an Eviction Notice.

A no reasons Notice to Terminate

A no reasons Notice to Terminate is used to end a lease at the end of the lease term and at any time afterwards.

The Notice gives a tenant a period of time to move out. No reasons are given.

The notice periods are:

  • To end a fixed term tenancy: a landlord gives at least 30 days’ notice (one month); a tenant gives at least 14 days’ notice (two weeks). The notice must be given before the end of the fixed term, but cannot expire until the end of the fixed term.
  • To end a periodic agreement: a landlord gives at least 90 days’ notice (three months); a tenant gives at least 21 days’ notice (three weeks). The notice can be given at any time.

It was once the case that landlords and tenants gave the same notice: for example, if rent was paid weekly, then one weeks’ notice to quit was given. But consumer protection is now the rule, and the landlord must give 90 days’ notice to a tenant to end a periodic agreement, to give the tenant enough time to find new premises.

Experienced landlords will ensure that their lease terms do not end during the Christmas and New Year period because at that time of year, new tenants are hard to find and the premises are likely to remain vacant for a while.

Landlords and agents should use the model form of Notice to Terminate Tenancy Agreement on the NSW Fair Trading website. The model form contains information that must be given to a tenant.

What if the landlord gives notice and the tenant moves out early?

If the landlord gives a Notice to Terminate, is the tenant liable to pay the rent until the notice expires, or is the tenant able to stop paying the rent earlier, if they move out earlier?

These rules apply to the rent:

  • During a fixed term tenancy, the tenant remains liable to pay rent until the end of the lease term.
  • During a periodic agreement, the tenant is liable to pay rent only up to the date they move out and return the keys.

The tenant’s end-of-lease responsibilities remain the same if they move out early.

A Notice to Terminate with a reason

A Notice to Terminate with a reason is mostly given by a landlord for non-payment of rent, but there are other reasons:

  • Non-payment of rent for at least 14 days: a landlord gives at least 14 days’ notice
  • Any other breach by the tenant: a landlord gives at least 14 days’ notice
  • Sale (only during a periodic agreement): a landlord gives at least 30 days’ notice if the contract for sale requires the purchaser to be given vacant possession on completion. Note – During a fixed term tenancy, the property can be sold but the purchaser must honour the lease until the end of the term.

A tenant is in breach if they are in arrears with their rent, cause serious damage or injury; if they intimidate or harass the landlord; or if they use the premises for illegal purposes. The tenant is able to remedy the breach during the notice period.

A Notice to Terminate with a reason may be given by a tenant for these reasons:

  • Breach by the landlord: a tenant gives at least 14 days’ notice
  • Tenant is offered public housing
  • Tenant cannot return home because of an Apprehended Violence Order

A landlord is in breach if they fail to carry out repairs; if they enter without consent; if they fail to disclose when leasing the premises that the property is listed for sale, or that there has been a fire, flood, serious contamination or a murder (or serious violent crime) in the house within the previous 5 years.

Some reasons are outside of the control of a landlord and a tenant, which allow either to give a Notice to Terminate with a reason, such as:

  • Death of the sole tenant
  • Premises are destroyed, or become uninhabitable, or are compulsorily acquired
  • Landlord or tenant suffers undue hardship

Issuing a Notice to Terminate for non-payment of rent

Paying rent when it falls due is one of the two most important obligations that tenants have – the other being to look after the premises.

When does rent fall due? Rent falls due on the day that the lease starts, and then on the same day of every week or month afterwards.

If the rent is not paid on the day it falls due, then the tenant is in default. The landlord may follow up by telephone, visiting, letter (mailed or faxed), sms or email.

If the rent remains unpaid for more than 14 days, the time has come to issue a Notice to Terminate with a reason – being non-payment.

These rules apply to the Notice to Terminate:

  • The notice is given after the rent has remained unpaid for not less than 14 days.
  • The tenant may satisfy the notice by paying the rent arrears or agreeing to a payment plan.
  • The landlord cannot refuse to accept payment of the rent arrears.
  • The notice period is 14 days. It starts on the day after the notice is handed to the tenant; or to someone at the premises over the age of 16 years; or is left in the letterbox; or is faxed; or is mailed. If mailed, add 4 working days.
  • The notice cannot be served by sms or by email.

The landlord must keep a rent payment record - a rental ledger, which must be accurate.

In decision 2012/168 the Tribunal found that the Notice to Terminate was invalid because it was issued when the rent was less than 14 days in arrears. The rental ledger was not accurate in that a Rent Increase Notice given 6 months previously was defective as it had set a date that was 58 days, not 60 days, after the starting date for the rent to increase. By disregarding the Rent Increase Notice, the Tribunal found that the rent was less than 14 days in arrears.

This table illustrates a rental ledger where the tenant does not always pay the rent on time – the tenant sometimes pays in advance (CR) and sometimes is in arrears (DB).

Payments Received Description
Date Ref Amount How Paid Rent due Due on Paid to Balance
01/08/12 013 $450 Direct deposit $450 01/08/12 08/08/12 $0
08/08/12 014 $200 Direct deposit $450 08/08/12 15/08/12 $250 DB
11/08/12 015 $250 Direct deposit   08/08/12 15/08/12 $0
15/08/12 016 $450 Direct deposit $450 15/08/12 22/08/12 $0
22/08/12 017 $500 Direct deposit $450 22/08/12 29/08/12 $50 CR




Eviction in the Tenancy Tribunal

Almost one half of the cases in the Tenancy Tribunal each year are Applications for termination of a lease for non-payment of rent by a landlord (2011-2012 year: 13,586 out of 32,626 applications). Another 4,462 were for termination for other reasons. Previously, these Applications were known as an Eviction Summons.

These rules apply:

  • A landlord may apply to the Tribunal as soon the Notice to Terminate is served, and must apply no later than 30 days after the expiry of the notice period. After that time, a new Notice is needed.
  • A landlord may apply for these orders in the one Application:
    • Termination and possession of the premises on ground of non-payment of rent
    • Payment of rent arrears
    • An occupation fee (to apply from the termination date)
    • The rental bond (or part) be paid to the landlord (for rent arrears)
    • Specific performance order that the tenant pay rent on time
  • Once the Tribunal makes the order for termination and possession, the landlord delivers a warrant for possession issued by the Tribunal to the Sheriff’s Office. The Sheriff will notify the tenant of an eviction date and time. If the tenant has not vacated, the Sheriff will change the locks and move all the tenant’s goods out of the premises.
  • A landlord or their agent looks after the Tribunal proceedings. The Tribunal does not award legal costs or expenses against the tenant, so Lawyers rarely go to the Tribunal.

In practice, a landlord cannot expect that the Tribunal will make an eviction order as a fait accompli. Landlords and Tenants are required to mediate, that is, to discuss and agree on a plan of action. These alternatives are open:

  • If the tenant wants to stay - knowing that the Tenancy Law contains a general guarantee of the tenancy, an experienced landlord will agree to a payment plan. The landlord knows that if they do not agree, the Tribunal can order a reasonable payment plan. What is a reasonable payment plan? In decision 2012/176 the Tribunal ordered that $3,069.72 in rent arrears be paid by instalments of $100 per fortnight.
    Later on, if the tenant fails to make the payments as per the payment plan, the landlord can request the Tribunal to declare that the tenant is a frequent non-payer of rent. This means that the tenant cannot ask for a new payment plan to avoid eviction for non-payment of rent.
  • If the tenant wants to leave – the landlord will agree to a moving out date, and how the rental bond is to be paid out.
    If the tenant simply asks for time to move out, without agreeing to pay the rent arrears, the Tribunal will make the eviction order but suspend it for a time to give the tenant time to move out.

The fact that a tenant brings their rent up to date does not prevent the landlord asking the Tribunal to terminate the lease for another kind of breach, such as keeping animals without consent – in decision 2012/10 the Tribunal terminated a lease because a tenant kept 2 dogs without consent, even though the rent was up to date.

Can landlords take direct action?

No - Landlords are in serious trouble under the Tenancy Law if they attempt to forcibly evict the tenant themselves, change the locks to prevent access, cut off the water or power supply or paint the windows black to make the premises uninhabitable.

The rules for bringing a lease to an end under the Tenancy Law must be followed.


 

How to end a lease – Q & A

Q. The tenants were on a 6 months lease that was up in September 2012. The owner was contacted by her real estate agent to say that the tenants did not wish to extend another 6 months, as they are in the process of buying a home, but are happy to play it month - to - month. The owner now wishes to re-rent the property at a higher rent, and has advertised it available for rent in just over a month’s time. The tenant has been notified of this. This is the tenant’s response:


"You have broken the law by advertising on DOMAIN whist there is a tenant still in the premises on the dates advertised. Also the tenants require 90 days to end a lease, and also we have increased the rent by too much and there is no way the tenant has to pay this increase." The owner was clearly shocked, as she had been told on several occasions about the month to month agreement by her real estate agent.

What rights does the owner have? Can the owner show prospective tenants through whilst the current ones are there? If the tenants agree to be re-located before the notice period expires, will that end the lease?

A. Back before the current Residential Tenancy Laws came in, and even today for commercial tenancies, an expired lease which continued as a month to month lease could be terminated by a Landlord or by the Tenant giving one month’s notice. The Residential Tenancy Laws have swept this aside and now at the end of an expired Residential lease, the Landlord must give no less than 90 days’ notice and the tenant must give no less than 21 days’ notice to terminate the lease. Of course, if Landlord and Tenant agree, these notice periods to not apply. This has been the law in NSW for residential leases exceeding 3 months terms since 1987.

The best solution is to come to an agreement with the tenant, for the tenant to move out. If no agreement can be reached, then the landlord should give a 90 day notice of termination. The alternative is to give 90 days of increase in rent, but given the tenant’s response, it is best that the tenancy come to an end.

In terms of inspections, the landlord must comply with clause 22 of the Residential Tenancy Agreement. This allows 2 inspections per week at agreed times.

If the landlord gives the notice, the tenant’s obligation to pay rent ends when the tenant hands back the keys. The lease also ends the date the tenant returns the keys.
 


The Landlord’s Guide to Renting has been produced by Cordato Partners Lawyers, as part of its Property Law practice. It contains a brief outline of the Tenancy Law.

Because it is a general guide, is not intended to be relied upon for any specific tenancy situation. For those situations professional advice should be obtained.

If you would like to receive the Guide as a pdf email attachment rather than as a hard copy, or would like further hard copies of the Guide to distribute to clients, friends and relatives -
Contact us by email – info@propertyinvestmentlawyer.com.au or by phone (02) 8297 5600 (speak to Sally Wade). Our office is located at Level 5, 49 York Street, Sydney NSW 2000 (near Wynyard Station).

Also visit our website www.propertyinvestmentlawyer.com.au to view the Guide and other property investment information.

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