Incorrect terminology is sometimes used when it comes to early cancellation of leases, where landlords or estate agents refer to a “breach of contract” in the case of a lease cancellation but in fact it is not. Tenants have the right to (under the Consumer Protection Act) cancel their leases as long as they do so fulfilling all the cancellation criteria, says Michael Bauer, managing director of the estate agency IHPC.
The tenant must, if he cancels his lease, do this in writing and he give 20 business days’ notice. The rental which is due for that time will be charged for and the tenant must pay that amount.
The landlord or the agent should, once the written cancellation has been received, make note of the date on which the lease ends and must begin advertising immediately to fill the space. The responsibility does lie with the landlord or the agent to find a new tenant. The costs of advertising should be noted as these can be charged to the tenant as part of the “reasonable penalty” for cancelling the lease, said Bauer.
The cancellation penalty is not meant to be used to penalise the tenant but rather for the landlord to recoup any loss that he may suffer due to the tenant leaving the premises earlier than anticipated. The costs that can be included in the penalty charged are credit check costs for the prospective new tenant, advertising of the property and the rental that is lost while the unit stands empty.
These costs, said Bauer, cannot be charged upfront, they can only be calculated once a new tenant has been found and the landlord cannot gain financially or benefit from the tenant’s cancellation penalty costs.
“While it may be annoying and time consuming to find a new tenant, he has the right to cancel his lease if his circumstances change, but the landlord can recover some of the “lost” rental through the cancellation penalty. The CPA is vague in that it only says “reasonable penalty” may be charged but it usually shouldn’t take more than one month to find a new tenant, so one month’s rent should be more than enough,” said Bauer.
This article does not constitute legal advice. Please consult with the relevant professionals with regards to your individual requirements and queries.