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Is an apartment lease what you think?

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At its core, an apartment lease is a simple agreement. An owner gives their apartment to someone for a period of time in return for rent. Broadly speaking a lease is a mutually beneficial pact that works very well and is centuries old.

There are many lease rules like “quiet enjoyment” that are important. The lease term is critical as it gives security and certainty to each party.

For a residential lease, there is an added layer of consequence, as it is the renter’s home. Everyone understands the importance of having a secure and stable home. A lease for fixed term helps provide that.

But what happens if the renter’s circumstances change mid lease? What if they suddenly need to move home before the lease ends? Maybe they have had an unexpected change of circumstances in their work, finances, health, family or love? The change may be good or bad for  them.  Regardless of what has happened, the tenant can let the owner’s agent know they wish to move out and provide suitable notice for them to find a new tenant.

It’s generally called “breaking the lease”.

While the current tenant does not need to provide any reason for breaking the lease, they do need to keep paying rent until the owner finds a new tenant. Or pay the rent for a
“reasonable time” for the owner’s agent to find a new tenant. In the current market that may be about a month. There are costs to find a new tenant as well as rules about what can and can’t be
done in the process.

So, does a lease really provide the certainty and security for an owner that it purports to?  Well, there are legal obligations for a tenant when they sign a lease, plus a level of moral commitment. But the security of a lease term for an owner, is not always as it seems.

There are not any circumstances in which an owner can break a lease and require a tenant to move out before the lease ends (assuming the tenant is meeting all the terms of the lease). This is regardless of any unexpected change in the owner’s work, finances, health, family or love. Only after the lease term has ended can an owner ask a tenant to move out and then it is for specific reasons such as moving in or selling.

While this may appear to be an imbalance of rights, remember this is a renter’s home and the fundamental need to protect that is paramount.

After the initial lease term (which is normally one year), if the tenant or the owner don’t want to agree to a new lease term, the lease becomes a periodic or “month to month” lease.  All the existing lease terms and conditions (except the term which has lapsed) remain in place. It can stay this way for years. An owner cannot ask a tenant to move out just because they don’t want to sign a new lease.

A month-to-month lease can unsettle some owners or renters. They feel like they have no security or confidence in the shorter-term outlook. For many tenants this security is important, as an owner cannot ask them to move out during the lease term. But for owners the certainty of a lease is not really there. A tenant can move out by breaking the lease even within that lease term.

So, is a lease really a lease anymore? Well, yes, it is. Most tenants and owners respect the integrity and reciprocity of a lease agreement. But it does place more importance on the property manager’s relationship with each party to navigate through tricky situations.

While the formal rules have changed over recent years, the interpretation of the rules and evaluation of personal circumstances have also changed. Tribunals such as VCAT (Victorian
Civil and Administrative Tribunal) can often apply a standard of proportion and reason to their decision. In other words, they will contemplate if the residential tenancy act rules are reasonable and proportionate to the situation and personal circumstances of each party.

There are not many win / win outcomes from tribunal hearings. This is why property managers need to work hard to maintain open professional relationships with tenants
and owners. This relationship allows a respectful discussion to find a mutually beneficial outcome when curly situations arise. Often a fair and equitable agreement can be reached if there is a respectful discussion with all concerned.

A collaborative approach is far better than a combative one.

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Written by a 4th generation real estate agent Apartments Made Easy gives you the tools and tells you all you need to know about how to buy, sell, own, lease, and manage your apartment successfully.

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