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tenancy

What is the process for breaking a fixed-term lease?

Key Takeaway

Ending a fixed-term lease early in New Zealand typically requires the landlord's agreement or a Tenancy Tribunal order. Tenants may seek to assign the tenancy, or apply to the Tribunal due to severe hardship, the landlord's substantial breach, or family violence. Unlawfully breaking a lease can result in liability for ongoing rent and re-letting costs.

Ending a Fixed-Term Lease Early in New Zealand

A fixed-term tenancy is a rental agreement for a specific period of time, such as six months or one year [Source: Residential Tenancies Act 1986, s 66(1)]. Unlike a periodic tenancy, which continues indefinitely until notice is given, a fixed-term tenancy generally cannot be ended by either the landlord or the tenant by simply giving notice before the specified end date, unless particular conditions are met or mutually agreed upon [Source: Residential Tenancies Act 1986, s 66(1)(b)].

Methods for Ending a Fixed-Term Tenancy Early

There are several ways a fixed-term tenancy may be ended before its scheduled end date:

1. Mutual Agreement with the Landlord

The most straightforward way to end a fixed-term tenancy early is by mutual agreement between the tenant and the landlord. This can involve:

  • Assignment: An assignment occurs when the original tenant (assignor) transfers their entire tenancy agreement to a new tenant (assignee) [Source: Residential Tenancies Act 1986, s 43B(1)]. Once the assignment takes effect, the original tenant ceases to be a tenant and is generally no longer responsible for the tenancy [Source: Residential Tenancies Act 1986, s 43B(2)]. A landlord cannot unreasonably withhold consent to an assignment of a tenancy if the tenancy agreement does not expressly prohibit it [Source: Residential Tenancies Act 1986, s 43B(1)]. The landlord may recover actual and reasonable expenses incurred in relation to an assignment from the tenant [Source: Residential Tenancies Act 1986, s 42(2A)].
  • Subletting: Subletting involves the tenant renting out all or part of the premises to another person (subtenant) [Source: Residential Tenancies Act 1986, s 43A(1)]. In a sublet situation, the original tenant remains responsible to the landlord for all obligations under the tenancy agreement [Source: Residential Tenancies Act 1986, s 43A(2)]. A tenant requires the landlord's written consent to sublet the premises [Source: Residential Tenancies Act 1986, s 42(1)(d)].

2. Tenancy Tribunal Order

A tenant can apply to the Tenancy Tribunal, a judicial body that resolves disputes between landlords and tenants, for an order to terminate a fixed-term tenancy under certain circumstances:

  • Landlord's Substantial Breach: If the landlord has breached their obligations under the tenancy agreement or the Residential Tenancies Act 1986 (for example, by failing to maintain the property or interfering with the tenant's quiet enjoyment), and the breach is significant enough, the tenant may apply to the Tribunal for an order to terminate the tenancy [Source: Residential Tenancies Act 1986, s 60(1)].
  • Severe Hardship: The Tenancy Tribunal may make an order terminating a fixed-term tenancy if the tenant can demonstrate that they would suffer severe hardship if the tenancy were to continue, and that this hardship is greater than any hardship the landlord would suffer if the tenancy were terminated [Source: Residential Tenancies Act 1986, s 66(2)]. This is a high threshold to meet.
  • Impossibility or Impracticability: The Tribunal may also order the termination of a fixed-term tenancy if the tenancy has become impossible or impracticable to perform [Source: Residential Tenancies Act 1986, s 66(1)(b)(ii)]. An example of this might be if the premises are destroyed or become uninhabitable due to unforeseen circumstances, in which case the tenancy may automatically terminate [Source: Residential Tenancies Act 1986, s 60A].

3. Family Violence

Specific provisions exist for tenants affected by family violence. A tenant experiencing family violence during the tenancy may apply to the Tenancy Tribunal for an order to terminate a fixed-term tenancy [Source: Residential Tenancies Act 1986, s 56B(1)]. The tenant must typically give at least two days' written notice to the landlord before making such an application [Source: Residential Tenancies Act 1986, s 56B(2)]. The Tribunal must be satisfied that the tenant is affected by family violence and that the tenancy should be terminated [Source: Residential Tenancies Act 1986, s 56B(3)].

Consequences of Unlawfully Breaking a Fixed-Term Tenancy

If a tenant ends a fixed-term tenancy without the landlord's agreement or a Tenancy Tribunal order, they are considered to have unlawfully broken the lease. In such cases, the tenant generally remains liable for rent until the tenancy is legally terminated or a new tenancy agreement begins, whichever occurs first [Source: Residential Tenancies Act 1986, s 44(a)].

The landlord has a duty to mitigate losses, meaning they must take all reasonable steps to find a new tenant and minimise the financial loss caused by the early termination [Source: Residential Tenancies Act 1986, s 45(1)(d)]. The tenant may also be liable for other actual and reasonable costs incurred by the landlord as a result of the breach, such as re-letting expenses [Source: Residential Tenancies Act 1986, s 42(2A) for assignment, and generally under damages for breach of contract].

When to Seek Independent Legal Advice

Individuals needing specific guidance on their tenancy situation, understanding their rights and obligations under the Residential Tenancies Act 1986, or assistance with Tenancy Tribunal applications should consult with a legal professional. Free legal advice may also be available from Community Law Centres throughout New Zealand [https://communitylaw.org.nz/].

Key Resources