What to do if your relationship ends but your lease doesn't

It all started so well. You and your partner signed your names together on a lease for a rental property, taking that intermediate step before perhaps, one day, buying a home together. For one, or many reasons, things didn’t quite work out. Statistically, lots of relationships don’t. In fact, up to 33% of all Australian marriages are expected to end in divorce and there’s an even higher rate of separation in de facto relationships.

Breaking up with a partner can be hard enough without factoring in the financial and housing problems it creates when you go your separate ways. But when you sign a lease with someone, you’ve signed a binding legal agreement to pay rent until a set date. So, what happens when you no longer want to live together?

How does a relationship ending affect a lease?

In simple terms, a lease is a contractual agreement to rent a property owned by someone else for a specified period of time. Under such a contract, anyone choosing to leave the property for any reason - including personal reasons - will still have financial obligations even if they don’t live there anymore.

The Rental Specialists is a Sydney-based property company specialising in residential property management, providing advice to tenants, landlords, and investors. Principal Jo Natoli (pictured below) told Savings.com.au in the event of a relationship breakdown, both partners need to remember they remain jointly liable for paying the rent and upholding the terms of the rental contract. Her best advice for separating couples is to agree with each other on what’s going to happen to the tenancy.

“It doesn’t have to be a difficult process,” Ms Natoli said. “If there’s a change in circumstances, it’s always advisable to let the owner know via the agent as soon as possible.

“If the communication lines are open, the agent will also be more inclined to assist you so that it’s the best outcome for everyone.”

In practical terms, when a relationship breaks down between joint tenants, there are a couple of workable scenarios:

One person takes over the tenancy

If one partner wants to stay in the tenancy and take over responsibility for paying the rent by themselves or with another person, there is some paperwork to be done. Tenancy laws vary between the states and territories but generally, both partners must inform the agent, or the owner, in writing that there will be a change to the tenancy. This will require a letter or written agreement (not a text) signed by both tenants and also needs to be agreed to by the agent/owner.

This will trigger a change of tenancy requiring some official forms that need to be completed so the departing tenant can have their name removed from the existing tenancy agreement. The person remaining will usually have to update their financial status so the owner can be satisfied they can afford to pay the rent on their own.

“If that checks out, all that can go through relatively easily,” Ms Natoli said.

If another person is moving into the property, they will also need to go through the usual checks if they are being added to an updated lease agreement. There may be a fee associated with updating the lease but in most states, this should only be for ‘reasonable costs’ associated with preparing a new rental agreement.

There is more paperwork to be completed with rental bond authorities in each state. In best case scenarios, the departing tenant can be paid their share of the bond from the tenant remaining – or another person moving into the property. In any case, an agreement should be reached about covering the departing tenant’s share of the bond and their departure should also be officially lodged with the relevant rental bond authority.

Of course, the workability of this scenario depends on agreement between all parties (including the agent and owner). Here’s a list of the various rental laws and regulations in each Australian state and territory which may be able to assist with advice in difficult or specific circumstances:

If there is ongoing disagreement over the who goes/who stays conundrum, it may be best to go for option two (see below).

Ending the lease

If neither (or both) of you wants to take over the lease for the property - or neither can afford to on their own, the best option may be to break the lease.

“Sometimes if there’s disagreement, it can be easier that that happens,” Ms Natoli said.

Ending a lease early will almost always cost you money. In simple terms, you are reneging on the agreement to pay rent for the period you signed up for. There are many reasons tenants break their leases. Relationship breakdown is one of them and apart from the emotional load, it shouldn’t create any extra expenses than a standard break lease process.

Every state and territory has slightly different regulations governing break lease fees. Generally, you will also be liable to compensate the landlord for:

• rent until new tenants move in or until the end of your fixed term (whichever comes first)

• advertising costs for new tenants

• reletting fees, such as agent’s fees (although this does not apply in Tasmania)

Again, the key to keeping costs down is for both tenants to agree to break the lease and inform the agent, or the owner, as soon as practical. Generally, landlords are entitled to be compensated for their losses but shouldn’t make undue profit from your plight.

In a hot rental market, the agent may have suitable tenants on a waiting list and a quick turnaround in tenants can reduce your costs considerably. In a slower market, you have to be prepared to keep paying the rent for a longer period until new tenants can be found. Tenants' unions advise it’s worth keeping an eye on whether the agent and/or landlord is taking reasonable steps to advertise the property in a timely manner.

It’s strongly advised to leave the home in good condition. This not only gives you the best chance of having your bond returned in full, but the property will also look more appealing to prospective tenants. This may require some teamwork but if only one party is prepared to do the end-of-lease cleaning or pay for a bond cleaner, it’s worth taking the high road for monetary and reputational reasons. You don’t want your name to be added to any rental database ‘blacklists’, particularly if you’re looking for somewhere else to live.

What if partners can’t agree?

There are many scenarios that can play out in a relationship breakdown. Property managers have seen many of them. For example, one person might stay in the rental property on the promise they will find someone else to help them pay the rent. Until that happens, the departed person is still on the hook for rent even though they are not living there. The first person may also be in no hurry to find a new housemate.

Another scenario is that the person staying in the home may not be cleaning or maintaining it and when they leave or the lease agreement expires, the departed tenant may have no idea how the property has deteriorated. If their name has remained on the lease and their bond is still lodged with the bond authority, they will still be liable for the clean-up costs even though they were not living there and may lose their bond as well.

“Usually, people are very responsible when there’s a relationship breakdown but if people don’t deal with it, or don’t end the tenancy, it can come back and bite them later on,” Ms Natoli said. “We have seen that before.”

The best advice is to come to a mutual, workable decision and deal with whatever paperwork is required to carry it out cleanly as soon as possible. It is easy to say that it’s best to keep emotions out of the discussions but much harder to do. The best results almost always come from self-resolution.

What if domestic violence is involved?

In all states and territories, there are different arrangements for changing or breaking a lease agreement in domestic abuse situations, including physical, emotional, and financial abuse. Firstly, it is strongly advised to seek general advice on leaving the situation from the national domestic violence 24-hour hotline on 1800 737 732 (1800 RESPECT).

Tenants subject to domestic violence can generally change or end their tenancy responsibilities without penalty by taking the correct steps. In some states and territories, they may still be responsible for paying rent until the end of a set notice period. In most cases, vacating tenants fleeing domestic violence will not be responsible for any costs relating to:

• the ending of the tenancy agreement

• goods left behind in the home

• reletting the rental property

However, they are generally not excused from rent arrears or damages to the property not related to domestic violence. They should also inform the relevant rental bond authority of their situation. Each authority will be able to advise on the correct steps to take and what evidence may be required in processing any bond claims.

Here is also some general advice from each state’s rental authority on ending a tenancy owing to domestic violence:

Some tips to consider:

• When deciding who stays in the rental property, if there was one person in the property before the lease was signed in joint names, it may be easier to give them first right of refusal.

• If you can’t decide on who will stay in the property, it may be best to break the lease and move forward separately.

• If you are the departing tenant, make sure you do the requisite paperwork to remove yourself from the lease agreement otherwise you remain responsible for the rent and for what happens in the property after you have moved out.

• If you are leaving and have paid a share of the bond, be reasonable in when you expect it to be repaid to you. This may only be when a new housemate moves in or when your partner can afford to reimburse you.

• If you are the remaining tenant, allow the departing tenant reasonable time to find alternative accommodation. Try to agree on what will happen with any shared bond, possessions, or upcoming expenses, e.g. utility bills.

• If you are staying, ensure you are financially capable of taking over the lease agreement on your own. If you plan to get another tenant or housemate in to help cover expenses, begin the process as soon as you can. You don’t want to add financial stress to emotional stress.

• If you are remaining in the property, do what you can to reimburse your partner their share of the bond as soon as you are in a financial position to do so. They may need it to help with the expense of moving into another property.

• Once the bond has been settled under any new arrangement, make sure the name/s of the bondholders are changed with the relevant bond authority. This will alleviate any complications down the track. Rental bond authorities in every state and territory strongly urge tenants to resolve bond matters among themselves before contacting them.

• Don’t forget to adjust any insurance policies covering the property and/or its contents.

• Don’t leave the other person in the lurch. Make sure you keep contributing to rent while you are legally liable for it and stump up for your share of any expenses that come in after you have left. This is simply the right thing to do, a good guide of how to act in any situation.

Above all, always keep your agent and/or landlord in the loop about what’s happening and try your hardest to be civil and keep your emotions in check during what will be a difficult period. If you arrive at a stalemate in your discussions, mediators are available who can assist with more complex scenarios, such as who gets what and how to untangle any shared assets or liabilities. Relationships Australia (1300 364 277) provides counselling and mediation services in the states and territories for reasonable fees.

Savings.com.au’s two cents

While Savings.com.au can’t provide relationship advice, we do know a thing or two about finances. When the two are inextricably linked, it is invariably best to resolve matters together in a mature and civil way to ensure both parties come out of the relationship without a major hit to their finances.

While everyone’s circumstances are unique, do your best to work together to decide who will live where, who will get what, and what is fair recompense if applicable. If you’re really struggling to make it work, you can seek professional help, such as from a mediator or even a good property manager. You can also consult your state’s tenants' union or tenancy services who can provide advice covering a wide range of scenarios. Involving lawyers may bring expenses far beyond the amounts you are trying to settle. Be prepared to take the high road if it means resolving relatively minor issues quickly and without ongoing emotional turmoil.

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Main image by Kelly Sikkema on Unsplash

In text image supplied by The Rental Specialists, Glebe 

Original article by William Jolly, 3 March 2021

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