My tenant wants out of a fixed term tenancy what now

Posted on Saturday, April 11 2015

My tenant wants out of a fixed term tenancy – what now?

Being an efficient landlord, you have secured the perfect tenants who have signed up until next summer. The maintenance is all up to date and you can relax and get onto all those other jobs you had planned.

The phone rings and the tenants begin to tell you how things have changed and they want out of their tenancy. It’s now April and in general the market quietens down towards wintertime (or at least further south or in areas that do not have high demand). What do you do?

Firstly, a fixed term is a fixed term. If you as a landlord wanted to break a fixed term tenancy you would have a hard time succeeding. The best option is always to negotiate. The tenants know they have signed a fixed term tenancy and that the tenancy cannot be ended by giving notice. One solution could be to enter into an arrangement with the tenants which states that they will pay for advertising and any other costs associated with finding new tenants. Further, they will remain responsible for the rent and the property until new tenants (approved by you) have been found to take over the tenancy. Although inconvenienced, you are at least not out of pocket.

By the way, ideally you do not want to get into the situation where a tenant has the right to sub-let the property or you being put in the position of accepting proposed tenants that are not suited to the property. If the standard tenancy agreements are used, then where it states “The tenant shall not assign or sublet the tenancy without the landlord’s written consent” it is essential that you cross out “without the landlord’s written consent” as you can not unreasonably refuse consent. By removing that clause altogether you therefore categorically stating that the tenant cannot assign or sublet the tenancy. There are now exemplary damages of up to $1000 for assigning or subletting a tenancy when prohibited to do so or without the landlord’s written consent.

So now you are looking at finding replacement tenants while holding your existing tenants to the contract until that has happened. It is in your best interest that new tenants are found quickly before the relationship sours. Once you have had your current tenants sign a letter stating that you understand they wish to break their tenancy, they too understand that they are in a fixed term contract and you are prepared to let them out of the contract once approved tenants have been signed up to take over their tenancy. That letter can also set out the costs they will incur such as advertising. We ask tenants to pay for advertising up front and we advertise on their behalf. It is also a good idea to agree in the letter how you will organize showing prospective tenants through the property. The more difficult it is to get prospective tenants through the property, the longer it will take to find replacements. The existing tenants need to understand that this is an area they can really help the process.

When a tenant tells you they want to leave, this is also a good time to undertake a property inspection. You will then be able to point out anything the tenant needs to do to help find replacement tenants. The grass may be too long or the gardens may need to be weeded. There are usually a number of things a tenant can do to help the renting process both inside the property and out. These are also items they will need to attend to at the end of the tenancy anyway so they should not cause too much of a problem.

The tenant cannot stop paying the rent while new tenants are being found and there are now new exemplary damages in the act if a tenant abandons the premises without reasonable excuse – up to $2,000. What is a reasonable excuse? When can a tenant break a fixed term tenancy? These are questions to tackle in another blog. Until then, good luck retaining your best tenants.

Tania and Kyle Elmer
Mana Property Management Ltd

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Expert's Bio

Tania & Kyle Elmer

Tania & Kyle Elmer are active investors with a large portfolio of properties in Dunedin and Central Otago and mentor investors in the techniques used to grow wealth through property investing. Kyle and Tania are Co-directors of the Leading Property Mangers of New Zealand (LPMNZ). Kyle is a past president of the Otago Property Investors Association (OPIA). They founded Mana Property Management Ltd to provide specialist management services to Discerning Landlords dealing in the quality end of the market. | Find Kyle on Google+

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