In last week’s blog post I chatted about the need to stop ‘waiting for your lease to finish’ and get out there and find the right property for you.
I thought you may also be interested to know the numbers of exactly what you could be liable for if you were to pull out of the lease, and the good news is in most cases it is not too bad. I had Lisa from leading Sydney leasing agency – Let’s Rent to share her tips on how to get out of a lease the most cost effective way if you’ve bought a home.
Step 1: Find out what type of lease you have.
Don’t have a current signed lease?
Surprisingly, exiting your rental in NSW when you are not on a signed lease is actually rather easy. You just need to give your agent or landlord 21-day’s notice in writing that you will be vacating.
But there is always a flip side, and without a signed lease your landlord could do the exact same thing to you. However, they’ll need to give you a much longer notice period, 90 days in fact. Sure, it’s a much longer period but you can’t negate the fact it would be inconvenient and costly if you were asked to leave. Made even more problematic if you haven’t yet purchased a home during that 90-day period and therefore will incur time and moving costs to find a new home, not to mention the hassle.
My tip: Always have a current up to date lease. That way you know the period of that lease, and you always have secure tenure.
You have a signed lease.
Great, you’ll just need to let your agent or landlord know as soon as you have exchanged contracts to allow as much time as possible for them to find a new tenant to replace you. In this case, you’re also up for a penalty fee called a ‘break fee’. There are two ways this fee can be calculated and which one depends on which option has been written into your lease.
My tip: Always read your lease well, so there are no surprises when you’re looking to leave. Hey, even ask them which break fee will apply.
Step 2: Ok, so you have signed a lease, these are the fees you will likely be liable for?
The 4 week/6 week rule:
They landlord/agent will look at the time left on your lease. Less than half way through the lease and you’ll need to pay 6 weeks rent. More than half way through you will only be up for four weeks. Do note that this is NOT a notice period but a penalty so you must pay. You’re also liable for all rent until your last day of occupancy i.e. returning your keys to your landlord or agent so make sure you add that cost on too.
My Tip: Make sure you have plenty of cross-over. Settlements don’t always go to plan, so allow yourself a few days or even a week to make sure you’re not caught short without a roof over your head.
Percentage of costs:
This is used to cover a percentage of your landlord’s costs based on the time left on the lease. For example, if there was 40% of the lease remaining when a new tenancy commences, you would pay rent until the day prior to that lease commencing and 40% of the letting and advertising costs. The letting fee is often 1-2 weeks rent plus GST and advertising costs can range between $150 to $400 as a general guide in Sydney.
My Tip: The clause used is set in your original lease and is not negotiable. Either way, it’s best to give your landlord/agent as much notice as you can so that you can make the appropriate arrangements, particularly if you are on the second clause requiring you to pay a percentage of the owner’s costs. The sooner the property can be re-advertised, the more likely the cost to continue paying rent will be mitigated.
One last thing:
The legislation allows for the landlord to gain access to the property for the purpose of re-letting 14 days before you vacate. This is probably the worst time for people to be coming through so if you have a good relationship with your landlord/agent, do let them in earlier so that you can mitigate your loss or simply the annoyance of packing while inspections are happening.
Good Deeds buyers tips are intended to be of a general nature. Please contact us for advice that is specific to your individual circumstances. You may also need to get advice from other professionals such as an accountant, mortgage broker, financial planner or solicitor.