Breaking a fixed-term residential tenancy early

Key information

• When a tenant signs a fixed term agreement, they are committing to stay for the full term.
• If a tenant wants to move out before the end of the fixed term, there could be costs involved such as a break fee.
• A break fee is a penalty a tenant agrees to pay if they move out before the end of the fixed term.
• There are some situations where a tenant can end a fixed-term agreement without penalty.
• A landlord may also be able to end a fixed-term agreement early but only for limited reasons specified in the residential tenancy laws.
• A tenant can end their fixed-term or periodic tenancy immediately, without penalty, if the tenant or their dependent child is in circumstances of domestic violence.

When break fees apply

Tenant breaking a fixed-term agreement signed from 23 March 2020

For agreements of 3 years or less

Mandatory break fees may apply, which are payable based on the stage of the agreement.

If the mandatory break fee applies, the set fee payable is:

• 4 weeks' rent if less than 25 per cent of the agreement has expired
• 3 weeks' rent if 25 per cent or more but less than 50 per cent of the agreement has expired
• 2 weeks' rent if 50 per cent or more but less than 75 per cent of the agreement has expired
• 1 week's rent if 75 per cent or more of the agreement has expired.

For agreements of more than 3 years

The landlord or agent may negotiate an agreed amount of compensation for their costs with the tenant.

These costs may include loss of rent, advertising, and a letting fee if the landlord uses an agent.

If the tenant and landlord are unable to agree on the amount of compensation, the landlord may claim from the bond or apply to the NSW Civil and Administrative Tribunal (NCAT) for an order that the tenant pays the landlord a certain amount of compensation.

The landlord will need to show the Tribunal what (reasonable) steps they took to minimise their losses (e.g. advertising for a new tenant without delay).

Tenant breaking a fixed-term agreement signed before 23 March 2020

The former rules apply and tenants should check their tenancy agreement under ‘Additional terms’ to see if it includes an optional break fee clause.

If optional break fee is included in agreement

The optional break fee clause will apply if the break fee clause has not been deleted from the tenancy agreement. The break fee payable will be either:

• six weeks rent if the tenant leaves in the first half of the fixed-term agreement, or
• four weeks rent if the tenant leaves in the second half of the fixed-term agreement.

The same optional break fee clause applies for fixed-term agreements of more than three years, unless the tenancy agreement specifies a break fee of another amount.

If optional break fee is not included in agreement

The optional break fee clause will not apply if the break fee clause has been deleted from the tenancy agreement.

A landlord may still seek compensation by applying to the Tribunal.

These costs may include:

• loss of rent
• advertising
• a letting fee if the landlord uses an agent.

The landlord or agent may negotiate an agreed amount of compensation with the tenant.

If the tenant and landlord are unable to agree on the amount of compensation, the landlord may claim from the bond or apply to the Tribunal for an order that the tenant pays the landlord a certain amount of compensation.

The landlord will need to show the Tribunal what (reasonable) steps they took to minimise their losses (e.g. advertising for a new tenant without delay).

When break fees do not apply

There are certain circumstances where a tenant can end their fixed-term or periodic tenancy immediately, without penalty. 

Ending a tenancy early due to domestic violence

A tenant can end their tenancy immediately, without penalty, if the tenant or their dependent child is in circumstances of domestic violence.

Other situations where break fees do not apply

In other cases, tenants can give 14 days’ written notice to end a fixed-term agreement early without penalty if:

• they have accepted an offer of social housing (e.g. from DCJ Housing)
• they need to move into an aged care facility or nursing home (not a retirement village)
• a landlord has put the property on the market for sale during the fixed-term, and the tenant was not told before signing the agreement that the property would be sold
• if the property becomes listed on the Loose Fill Asbestos Insulation register during the tenancy or was previously listed without the landlord or agent disclosing that information to the tenant.

A tenant still needs to pay the rent until they hand back possession of the property.

When a landlord can end a fixed-term lease early

In some situations, a landlord may be able to end a fixed-term tenancy early.

This could be because:

• they’re experiencing undue hardship (they will need to get an order from the Tribunal)
• the tenant has breached the tenancy agreement.

Note: this is only a limited list. See: Landlord ending a tenancy with or without grounds page for full details.

If the tenant has been served a termination notice and doesn't move out by the end of the notice period, the landlord can apply to the Tribunal to have them evicted.

Ending a tenancy early due to hardship

A tenant can apply to the Tribunal to end the tenancy on hardship grounds if there are special circumstances and they are within the fixed term of a fixed term agreement. A tenant can ask for an urgent hearing but will need to keep paying the rent. No prior notice is required.

A landlord can apply to the Tribunal to end the tenancy on hardship grounds if there are special circumstances, at any stage of the tenancy. There is no minimum notice period.

Learn more about experiencing hardship during a tenancy, including examples of hardship.

Going to the Tribunal to claim hardship

It is up to the party claiming hardship to explain the situation and provide evidence to the Tribunal to prove that there are grounds for ending the agreement.

The Tribunal may make a termination order if it is satisfied that the party claiming hardship would suffer undue hardship if the tenancy continues. If it makes that order, the Tribunal may also order that certain compensation be paid to the other party.