Check your lease-break protection before increasing rents | Your Finance Specialists | Loan Base
leasebreak

Check your lease-break protection before increasing rents



The rent increases we’re witnessing nationwide have been a relief to some financially-squeezed investors as maintenance costs and interest rates continue to climb. But if you’re considering hiking your price, be aware there’s a right and wrong way of going about it.

If you use a property management team, you should talk to them about current vacancy rates in the relevant area and the possible impact of increasing rents. 

Investors with properties in multiple jurisdictions, that is states and territories, should be aware that the rules for increasing rent midway through a tenancy vary across Australia. To complicate matters, they are subject to change.

For example, Victoria used to allow investors to increase rents with six weeks written notice every six months. Now, landlords can do it once every 12 months on a fixed-term lease. The state’s Consumer Affairs website breaks it all down for you.

Where this rule exists, many landlords have found they have no choice but to increase the rent in one hit rather than take an incremental approach to ease the impact on their tenants.

Unhappy tenants can appeal to an appointed tribunal or magistrate’s court, depending on the relevant jurisdiction. They may also use one of several tenant advocate bodies for advice.

While some investors might risk losing a loyal and reliable tenant by pushing the rent higher, the tenant must also consider their position if they want to break their lease.

Again, different jurisdictions have their own rules regarding the breaking of a lease. To give you an idea of the protection you might receive as a landlord, here’s how NSW allows you to handle the situation.

If your tenant walks out on a lease, you can apply the following enforcement, called a “break fee”, for leases signed after March 23, 2020: 

  • Four weeks rent if less than 25% of the agreement’s fixed-term has passed.
  • Three weeks rent if 26% to 50% of the fixed-term remains.
  • Two weeks if 51% to 75% of the fixed-term remains.
  • One week if 76% or more of the fixed-term has passed.

 

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Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice.


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