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Simon Corbell Warns Tenants They May be Liable For Lost Rent in a Declining Market

A slump in the ACT rental market and increasing vacancy rates has led to a number of Canberrans being hit with unexpected costs when they break their residential lease. With property owners increasingly forced to lower rent to entice replacement tenants, the blunt message from Attorney-General Simon Corbell is that it's up to the present tenants to pay the difference.

Under the Residential Tenancy Act, tenants could be reimbursing the owner for up to 25 weeks after they terminate their lease, plus the cost of readvertising the property until a new tenant is found. Although the situation has existed since 1997, the declining rental market has thrust it back into the spotlight.

An ACT Tenants Union spokeswoman said enquiries about breaking a lease were one of the top two categories of enquiry, particularly in relation to advertising costs and rental payment. She said many Canberrans were unaware of the provision, leading to confusion and surprise when they terminated their lease and found themselves suddenly paying double rent. ''It’s a strange situation where the market is both beneficial for tenants but also has difficulties for tenants, particularly if they are made redundant in this current job market,'' she said. According to June quarter figures released by Australian Property Monitors, the median weekly rent for houses in the ACT fell by 6.3 per cent to $450. The average weekly rent for units in Canberra fell by 6.1 per cent to $385, which meant units transitioned from being the third most expensive in the country during April to among the cheapest.


Real Estate Institute of the ACT chief executive Ron Bell said declining rental prices in Canberra have only recently been felt by real estate agents and owners. ''Twelve months ago people were just walking in and saying 'I can’t afford this' and then walking straight out – there was quite a lot of that,'' he said.

Australian Property Monitors Domain Group senior economist Andrew Wilson believes Canberra’s rental woes are due to subdued housing conditions that may continue to exist for some time. ''There’s a consistency about the fall over the year for both houses and units, and I do think it’s just generally a lack of demand for rental properties in Canberra,'' he said. ''I think that does reflect what is an underperforming local economy concerned about job security.''


The Attorney-General's clarification comes just one month after the ACT government announced a wide-ranging review of the Residential Tenancy Act 1997, which was welcomed by the Tenants Union and remains open for community input until September 12. Mr Corbell said the existing legislation ensures ''lessors are only able to recover what they would have received under a lease agreement if the tenant had not terminated it, and then only up to a maximum amount of 25 weeks' rent plus costs of readvertising''. In a discussion paper accompanying the announcement of the review, the ACT government indicated public service job cuts in coming months may further increase the vacancy rate in the ACT.


Tenants Union of NSW policy officer Ned Cutcher said tenants in NSW face the same possibility of being held liable for rent lost, although this was uncommon given the state of the real estate market in Sydney. But Mr Cutcher said a review of the NSW Residential Tenancies Bill in 2009 introduced an opt-in break-fee provision to allow tenants to break a lease more easily and be spared from a number of administrative fees. The ACT Tenants Union spokeswoman said such arrangements could be considered as part of the ACT government's review into the tenancies act. Mr Corbell said anyone with concerns regarding the arrangements between tenants and owners could make a submission to the government review.

SOURCE: The Canberra Times; August 20, 2014