The Law Handbook 2024

Chapter 6.1: Tenancy 497 • a re-letting fee (calculated on pro-rata basis); • advertising costs (calculated on pro-rata basis); and • lost rent for a reasonable time until new renters move in, or until the end of the fixed-term rental agreement, whichever is less. When determining the amount of compensation payable, VCAT must determine advertising costs and reletting fees (if any) on a basis that is proportionate to the actual cost of securing the current renter (s 211A(3) RT Act). Renters are not liable for advertising and reletting fees upon breaking a fixed-term rental agreement that is a renewal of the original fixed term (see Craig v Mitchell (Residential Tenancies) [2015] VCAT 597 (27 April 2015)). Previously, lease-breaking was based solely on case law; there have been no published decisions to date on whether the new legislation has changed any of the practices in relation to lease-breaking. Reasonable costs What constitutes reasonable costs is determined by VCAT, which considers factors such as: • the amount of notice, if any, given to the rental provider by the renter; • whether the renter or the rental provider advertised the premises for a new renter; • the length of time left to run on the fixed term; • any action taken by the rental provider or their agent to find new renters; and • the reasonableness or otherwise of any refusal by the rental provider of prospective new renters. Costs may not apply for private rental providers. Consideration should also be given with respect to lease breaking of renewed leases, and the losses a rental provider might have ordinarily had to bear should a new fixed-term agreement not be entered into. This is a matter VCAT may wish to consider. Agreements about lease-breaking costs A rental provider is not automatically entitled to lease-breaking costs. Generally, renters are advised not to sign any form that requires acknowledgment of liability of the above lease-breaking fees. Any terms in the rental agreement, or subsequently signed agreement regarding lease-breaking, may not necessarily be enforceable (s 27 RT Act), as the actual loss must still be established and evidenced to VCAT. If a rental agreement was entered into on or after 29 March 2021, the following terms are prohibited: • a term that provides that if the renter contravenes the rental agreement, the renter is liable to pay all or part of the remaining rent under the rental agreement, or increased rent, or a penalty, or liquidated damages; or • a term that imposes fixed fees for terminating a rental agreement early, unless the basis for calculating the fixed fees has been set out in the rental agreement (s 27B RT Act). These terms are invalid and unenforceable. It is an offence to include these terms in a rental agreement from 29 March 2021 (ss 26A, 27 RT Act). In lieu of signing any acknowledgment regarding lease-breaking liabilities, renters should affirm – on the date they gave the Notice of Intention to Vacate – that they will not pay any further rent until the matter is determined by VCAT. Renters should also affirm that the rental provider has an obligation to mitigate loss pursuant to section 211(e) of the RT Act. Parties may also wish to refer to ‘Tenancy databases’, above. Rental provider should minimise loss The rental provider has a duty to keep their loss to a minimum (s 211(e) RT Act). Further, when VCAT calculates the compensation for loss of rent payable (if any), it must take into account what loss could reasonably have been mitigated by the rental provider promptly reletting the premises (s 211A(3)(b)). If a rental provider does anything to increase the costs of the lease break (e.g. putting up the rent so that it is more difficult to find replacement renters), then the renter should argue that their liabilities should be substantially reduced. The renter should check that the rental provider or agent promptly advertises the property, and that they do not advertise it at a higher rental than the renter is paying. The renter should also keep a record of how many prospective renters inspect the property. Evidence of the rental provider refusing a reasonable candidate or efforts to transfer the lease may also be relevant. VCAT may also take into account any hardship the renter would have incurred due to an unforeseen change in the renter’s circumstance (s 211A(3)(c) RT Act). This is particularly relevant for renters who ideally should have applied for a reduction of the