Abandonment of Lease

Overview

What happens when a lessee walks away from a lease?

A lease terminates on abandonment by the lessee. However, a lessee cannot simply walk away from a contract without consequence. The lessor can apply to the Magistrates Court for an order to repossess the premises and for compensation for damages caused to the lessor as a result of the abandonment. The lessee may be ordered to pay rent for the remaining period of the lease and a percentage of the lessor’s advertising costs and re-letting fees. The Magistrates Court must have regard to when the lease would have ended and whether the costs would have incurred by the end of the lease. The costs for abandoning a lease can be high.

The rules are not meant to punish a party for breaking a lease, but to establish a responsibility to make up for the lessor’s losses as if the lease hadn’t been terminated prematurely. However, the lessor must mitigate any losses resulting from the lessor’s abandonment by trying to find a new lessee. The lessor is not meant to make a profit from the abandonment and is therefore not entitled to compensation for loss that could reasonably have been avoided.

Notification

Generally, the lessee may terminate a lease when the fixed term period of the lease is due to end by giving the lessor at least fourteen days’ notice. If the termination of the lease occurs after the fixed term has ended, the lessee may end the lease by giving the lessor at least twenty-one days’ notice. The notice must be in writing and the lessee must pay rent up to, and including the last day of the notice.
If the lessor and lessee mutually agree to the termination of the lease, the lease can be ended at any time.

Goods left behind

It is part of the lessee’s responsibilities to ensure that all belongings have been removed from the premises when the lease ends. The lessor must be certain that the lease has ended or that the premises have been abandoned by the lessee before taking any action. The procedure differs depending on the situation. If there are doubts whether the premises have been abandoned, an application can be made to the NSW Civil and Administrative Tribunal (“NCAT”) to receive a tribunal order. However, if there are no doubts there is no need for an order from NCAT. The premises can then be secured and any goods left behind can be dealt with.

The lessor must try to notify the lessee of all goods of value that have been left behind and that have to be collected. The notice can be delivered in writing, in person or over the phone. If the lessee does not respond to the notification after two days, the lessor may leave a notice on the premises, e.g. on the front door. If it is obvious that the belongings are leased, the rental company must be contacted. Any rubbish or perishable items can be disposed immediately.

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