The current state of our WA rental market is unprecedented. I do not love using the term ‘unprecedented’ as it is a word being coined by many these days to invoke an emotional reaction from the reader. It is certainly a word that grew in popularity throughout 2019 - 2022 as we worked our way through the complexities of the Covid-19 pandemic. It is a term that is however fitting in the case of our WA rental market. When you hear about families having to sleep in their cars, or tents or to brave abusive family environments just to have a roof over their heads the use of an emotive word like ‘unprecedented’ is a minor literary sin that I am happy to make. I am glad that the real effects of this rental shortage are being highlighted in recent online posts and in our media. Kim McDonald of The West Australian’s article on Saturday 15th October, 2022, brought this grim reality to the surface for us all to read and consider (thank you very much Kim for reporting this). Link: Article, The West
As an active property management agency in the Perth inner city we have come across our share of tear jerking stories and genuine tales of hardship in 2022. We try as much as we can to help but there are only so many apartments, townhouses, homes and shared living rooms that we can place our applicants in to. So if there is a rental crisis, and we agree that there is, why are there so many break leases occurring at the moment?
Our agency is liaising with a higher than usual number of tenants that are choosing to break their fixed term lease in 2022. For all accounts this is a trend that is being experienced by many agencies within our Reiwa network. Breaking lease and going where, you might ask? This is a great question, one which my team and I have been asking in recent weeks.
The reasons are many and the layers behind the decisions vary. For many it is purely monetary, for a few it is the personal preference for a lifestyle change, while for some the reasons are geo-political. Delving a little deeper in to this, the following are actual situations that we have come across in recent weeks:
Breaking a lease does not come cheap, nor easy, so the decision being made by the tenant is 9 times out of 10 a genuine need and it has been well considered. There are significant costs that the tenant has to cover to mitigate the lessor’s loss. This can include pro-rata reimbursement of the unexpired portion of the letting fee paid to the Agent, the advertising costs to find a new tenant as well as the weekly rent until a new tenant begins their lease (not to mention any shortfall in the weekly rent achieved, however in this market the rent is likely to have gone up for the property). The lessor has a requirement to mitigate the tenant’s loss as well. As the Agent we have a challenging role when managing this process to ensure that we meet the obligations of the Residential Tenancies Act while maintaining a harmonious balance between the tenant’s needs and the lessor’s wants.
One thing that a break lease can achieve in a tight rental market is that it provides another available property to help accommodate the pent up rental demand. It is not all bad news, despite what the name ‘break lease’ may insinuate. In many circumstances the tenant is moving on to a new and positive chapter, the lessor is being reimbursed a significant portion of their costs for assisting the vacating tenant, and a new keen applicant has the opportunity to call the property their new home. I would actually consider it to be a win-win scenario a lot of the time.
Brendon Habak - Selling Principal