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NSW Breaking Lease Without Incurring a Financial Penalty?

Discussion in 'Property Law Forum' started by LeaseBreaking, 10 February 2016.

  1. LeaseBreaking

    LeaseBreaking Member

    10 February 2016
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    Preface: I am not seeking formal legal advice, but rather, guidance from anyone else who has been in this situation.

    The house we leased was sold in December and the new owner said they would move in at the completion of our (18-month) lease in March.

    We studied the applicable legislation and noticed that you may break a lease without penalty if "the landlord has notified the tenant of the landlord's intention to sell the residential premises, unless the landlord disclosed the proposed sale of the premises before entering into the residential tenancy agreement" (which they did not).

    As you know, the rental market is crazy, so it's near impossible to find a new home at the same time as your existing lease expires. We got lucky and were approved for an apartment in February, but it was several weeks prior to our lease officially ending (which is why we looked up the legislation).

    We provided the agent with 14 days' written notice, only to be informed that this only applied if notice was given within 14 days of settlement with the new owner. It says nothing of the sort in the Act, but a phone call to Fair Trading seemed to back the agent's assertion that you must provide the notice within 14 days of settlement.

    I did some more digging and found a case from 2013 which was won by a tenant in almost identical circumstances. Specifically:

    • The relevant section of the Act provides that a tenant may give a termination notice of a fixed term agreement without compensation to the landlord (that the home was sold during the term of the lease without this fact being disclosed at the beginning).
    • The act provides for termination, without compensation to the landlord, if the ground is satisfied. On the evidence, there is no controversy that the ground was satisfied.
    • The section is silent on any time line for the applicants to serve a notice of termination after the ground is satisfied, other than to say that the notice must provide for a termination date of no less than 14 days from the date of service of the notice.
    • The respondents’ submission was that the notice of termination was served after the date of settlement of the purchase and the applicants should not be afforded relief from payment of the “break lease” fees. As I have said, s 100 (c) (1) is silent on any time line for the service of the notice if the ground is satisfied; the service of the notice of termination after the settlement date of the sale, in my view, still entitles the applicants to the relief from payment of any break lease fees to the landlord provided the ground is met.
    • I am satisfied that the applicants are entitled to serve a notice of termination for the early termination of the agreement without payment of any compensation to the landlord having satisfied s 100 (c) (1) and 100 (1) (4) of the Act.
    I am genuinely unsure of what to do here.

    According to the law and precedent above, I don't believe I owe any compensation for breaking the lease, as I provided 14 days' written notice, but NSW Fair Trading steered me in the opposite direction.

    The agent has since made a claim for 100 per cent my bond, which I have disputed and am likely headed to a hearing. The amount they seek is $3000. I countered with $900 out of sheer goodwill to save everyone the time and hassle and they came back with $1200 as a final offer to avoid arbitration. They were quite aggressive yesterday, seeking the full amount, but have since come back to the table several times which suggests to me they are unsure about their standing in front of a tribunal.

    I still don't believe I am required to pay them, but it's a hell of a gamble if I go into a formal hearing and lose.

    Has anyone been in a similar situation? What did you do?
  2. LeaseBreaking

    LeaseBreaking Member

    10 February 2016
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    UPDATE: The agent phoned me this afternoon to nitpick the cleaning job that was done when we left. Her complaints were "streaky shower door" and "some grease in the oven". She said the new owner would be willing to let this go if we accept their offer of $1200, which only tells me how desperate and unsure they are of their standing if this goes to tribunal.
  3. James D. Ford - Solicitor

    James D. Ford - Solicitor Well-Known Member
    LawTap Verified Lawyer

    19 June 2014
    Likes Received:
    Hi LeaseBreaking

    The bottom line here is that if you proceed without legal assistance, you run the risk of getting it wrong.

    It appears as if you have a solid case, as you have found a previous Tribunal Decision on point, that has ruled in your favour.

    The point to make, is that many possibilities exist that could change the outcome of the matter:
    • there could be more recent decisions that have overturned this position; or
    • in this case the Member of the Tribunal could have gotten it wrong;
    • or the legislation itself could have been amended after this decision was made.
    Fair Trading are not lawyers. Real Estate Agents are not lawyers.

    The question to ask when faced with opposing views, is what legal basis are they seeking to rely upon, and where does it say the termination must be within 14 days of the settlement?

    In my opinion, what they say does not make common sense.

    What if the sale proceeded and you were not informed, until well after the settlement? Would you still lose you right to terminate without needing to pay compensation?

    It doesn’t make any sense to impose a time limit in relation to an event, which you may or may not be aware of.

    Kind regards
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