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Can the rent be increased after a tenant breaks their lease?

 

 

A few weeks ago, the Property Management Update addressed some frequently asked questions about rent increases, which you can read here. Since then, the Property Management Support Service has received several enquiries about whether or not the rent can be increased after a tenant breaks the lease.

A scenario a property manager may face is this: a tenant wants to end their current fixed term agreement early (without grounds) which is technically a breach of the agreement – otherwise known as a “break lease”. The owner wants to increase the rent for the fixed term agreement for the next tenancy. Does the RTRA Act prevent landlords from increasing the rent after a break lease? Does rent have to be offered at the same amount as the existing agreement?

Answer: No, the RTRA Act does not state this. The existing tenant is seeking a mutual agreement with the owner to end their Fixed Term Tenancy Agreement early without grounds. Because the tenant has breached this agreement, the owner can seek to be compensated by the outgoing tenant.

If the owner is wanting to increase the weekly rent, the property manager should complete a Comparative Market Analysis (CMA) to determine what the market rent currently is for similar properties in the area. It is critical this CMA is compiled on the basis of the property being rented in a timeframe reflective of current vacancy rates and trends in the market, rather than a speculative rent. In  many areas of Queensland currently, rents are on the rise and vacancy rates are falling with minimal vacancy periods.

It’s important to ensure any rent increase does not disadvantage the tenant who is breaking their agreement by way of extending the vacancy period outside the scope of the market trend.  For instance, at the time of writing, it is not uncommon in some areas for property managers to receive multiple applications within a day of a rental property hitting the market and a new tenancy agreement being immediately entered into.

 

In some cases, this fast turnaround is unprecedented due to the urgency for the commencement date for the new tenancy. If this is the case, there is evidence to provide to the Queensland Civil and Administrative Tribunal (QCAT) that the rent increase did not impact on increasing the compensation claim by way of an extended vacancy period. Each case is different, so always start with the CMA, provide this to the owner and the outgoing tenant and record all communications with all parties and instructions from your client.

All information provided in this article is from the REIQ (Real Estate Institute of Queensland)