Breaking a Lease NSW: A Landlord's Guide

This article is general information only, not legal advice. The figures below come from NSW Fair Trading's guidance on ending a tenancy early, so confirm the current break-fee schedule and your specific situation with them before acting on any of it.

A tenant telling you they're leaving before the fixed term ends is never welcome news. There's lost rent to think about, the scramble to find someone new, and often confusion about what you're actually owed. NSW does have a clear, standardised system for this though, and getting your head around it early saves a lot of arguing over money later.

The standard break fee schedule

For most fixed-term residential tenancy agreements in NSW, a set break fee applies unless the lease says otherwise. How much depends on how far into the fixed term you are when the tenant gives notice:

• 4 weeks rent if less than 25% of the term has passed
• 3 weeks rent if 25% to less than 50% has passed
• 2 weeks rent if 50% to less than 75% has passed
• 1 week rent if 75% or more has passed

The scale is front-loaded on purpose. A tenant breaking a 12-month lease a month in owes more than one breaking it in month ten, simply because there's more time left to fill and less certainty you'll fill it quickly.

Working out the percentage

The calculation runs off the fixed term itself, not the calendar year and not how long the tenant has actually lived there if a lease renewal is involved. If you're not sure which bracket applies, count the days from the start of the fixed term to the date notice was given, divide by the total length of the term, and match that percentage against the schedule above.

When the standard fee doesn't apply

The fixed break fee schedule isn't universal. Two situations sit outside it:

• The fixed term is longer than 3 years
• The tenancy agreement specifically excludes the standard break fee

In either case you're entitled to claim the tenant's actual reasonable loss instead of the flat fee. That could end up higher or lower than the standard schedule, depending on how fast you re-let and what it actually costs you to do so.

Your duty to minimise the loss

If you're claiming actual loss rather than the standard fee, you're expected to make a genuine effort to re-let the property promptly. Leaving it vacant for months and then billing the outgoing tenant for all that lost rent won't fly. Reasonable steps generally mean advertising at a fair market rent without unnecessary delay and accepting a suitable new tenant when one applies. Keep records of what you did and when, since that's exactly what you'll need if a dispute ever comes up.

No penalty situations

In some circumstances a tenant can end a fixed-term agreement early with no break fee at all, domestic violence being one example. These exceptions exist for good reason, and landlords shouldn't go in expecting to recover a fee here no matter how much of the term is left.

What this means day to day

Most break-lease situations follow the same rough pattern:

• The tenant gives written notice that they intend to leave before the fixed term ends
• You work out where in the term this falls and which break fee bracket applies (or whether actual loss applies instead)
• You advertise the property as soon as practical, at a realistic rent
• The bond and any owed break fee or reletting costs are settled once the tenancy ends and the new tenant (if any) is confirmed

A couple of habits make this run smoother. Keep your lease documents organised so you can check the fixed-term start and end dates without digging through old emails. If you manage several properties, a simple record of rent already paid and the date notice was given makes calculating the correct break fee much quicker, and cuts down the chance of a dispute with the outgoing tenant over the figure.

Communicating with the tenant

Most break fee disputes come down to tenants not understanding how the number was worked out, not actual disagreement with the law. Walking them through the sliding scale plainly, and showing your working, usually settles things without drama. If the tenant does dispute the amount or your re-letting efforts, that's when it can escalate to the NSW Civil and Administrative Tribunal, so document everything from the first notice onward.

FAQ

Can I charge more than the standard break fee if my costs were higher?

Only if the fixed term runs longer than 3 years or the lease excludes the standard fee. Otherwise the scheduled amount applies regardless of what your actual costs were.

What if the tenant just stops paying rent and leaves?

That's a different scenario from a formal early termination notice, and may involve rent arrears and bond claims alongside any break fee considerations. Worth getting specific advice from NSW Fair Trading on handling abandonment situations correctly.

Does the break fee cover advertising and letting costs?

No, the standard break fee schedule is a fixed amount rather than reimbursement for specific costs. If you're claiming actual loss instead because the fixed fee doesn't apply, reasonable re-letting costs may form part of that claim.

Who do I confirm the current rules with?

NSW Fair Trading is the authoritative source for the current break-fee schedule and any updates to it, so check there before finalising a figure with a departing tenant.

Keeping track of lease start dates, rent paid to date, and notice periods is a lot easier when it's all in one place rather than scattered across emails and spreadsheets. EZRENT's landlord tools keep your lease details, rent ledger and tenant communications organised, so when a tenant does give early notice, working out exactly where you stand takes minutes rather than an afternoon of digging through old paperwork.

This article is general information only and is not financial, legal or professional advice. Rules, thresholds and requirements vary by state or territory and change over time - always check the current rules with your local tenancy authority or a qualified professional before acting on anything above.