The Landlord’s Rights in the Abandonment of a Lease

The Consequences for Abandoning a Lease

What happens when a lessee walks away from a lease, leaving all responsibility to the lessor? If a lease is abandoned by the lessee the abandonment may amount to a breach of the contract. However a lessee cannot simply walk away from a contract and may therefore be ordered by the court to pay rent for the remaining period of the lease, a percentage of the lessor’s advertising costs and re-letting fees. The lessor can apply for an order by the Court to recover possession of the premises and to recover compensation for losses caused by the lessee’s abandonment. The court will regard when the lease would have ended and if the costs would have incurred by the end of the lease anyway. The lessor is not supposed to profit by the breach of the lessee. The lessee should think twice before abandoning the lease since the costs can be high.
The lessor must mitigate any losses resulting from the lessor’s abandonment, by trying to find a new lessee. If the new lessee pays rent which is equivalent to the rent paid by the original lessee, then there is no liability for the original lessee to pay rent for the remaining period of the lease. However if the new lessee pays a lower amount of rent than the first lessee, the first lessee is liable to pay the difference in rent for the remaining period of the lease.
The purpose of the legislation is to put the lessor in the position as if the lessee had not terminated the lease early. The regulations are not meant to punish a party for breaking a lease, they are meant to establish a responsibility to make up for the lessor’s losses.

The lessee must notify the lessor of the early termination of the lease

The lessee must notify the lessor of an early termination of the lease as early as possible and should make it as easy for the lessor as possible to show the premises to new lessees.
The notification has to be in writing, signed and dated by the lessee and the lessor, identify the premises, and specify when the premises will be vacant and the reason for terminating the lease.
The lessee has to give the lessor 14 days of notice, if the breach is caused by the lessee not paying rent, 14 days needs to have elapsed from due date before the notice is issued.

Need Legal Advice?

For more information and legal advice regarding leases, call our experienced solicitors on (02) 9233 7776 or email us.