Ending a fixed-term tenancy agreement early: a guide for landlords
Normally, a fixed-term rental contract means that your tenants are tied into the rental for the whole of their term, and liable for rent for the whole period.
However, sometimes circumstances can change — for either party — and it’s a good idea for both landlords and tenants to know what options are open to them when it comes to ending a fixed-term rental contract early.
Sometimes, tenants or landlords can end the contract if there’s a break clause in the contract, as long as they abide by the terms it sets out, such as giving the other party the appropriate amount of notice.
If there isn’t a break clause, it’s not possible for either side to unilaterally terminate the agreement. However, there are certain methods by which either a tenant or a landlord can wind down a tenancy before the end of its term.
When can tenants end a tenancy early?
A lease agreement is a legally binding document, and both tenants and landlords are usually tied in for the full term of the rental agreement. However, there are some situations in which tenants may be able to end the agreement early.
A break clause is a clause inserted into a rental contract that provides a way for either the landlord or tenant to end the tenancy before the end of the term.
It’s important for both parties to read and understand the terms of the break clause. It will outline when it can be used, and how much notice each party needs to give to end the tenancy. For example, it might say that tenants can end the tenancy after six months if they give the landlord two months’ notice.
Right to unwind
Under certain circumstances, the tenant can ‘unwind’ the rental contract in the first 90 days after its start date. This is only possible when the tenant can reasonably claim that they only signed the agreement due to being misled by the landlord or their agent — for example, if they were told the property has certain amenities which it later turned out not to have.
If they inform the landlord that they want to unwind the tenancy within one month, the tenant is usually entitled to a full refund of the money they have paid out — as well as being released from the contract.
When can landlords end a tenancy early?
It’s generally quite difficult for landlords to end a tenancy agreement before the end of its fixed term unless the contract includes a break clause that allows for this. There are, however, certain situations when the landlord could issue their tenants with a Section 8 notice in order to end the tenancy early.
Section 8 notices
Section 8 notices are a way of evicting tenants before the end of their term. They can only be issued in certain situations, such as when the tenant has breached the terms of their contract, for example by damaging the property, not paying rent or using the property for something illegal.
Section 8 of the Housing Act 1988 lays out 17 ‘grounds’ for issuing an eviction notice. Of these, eight are ‘mandatory grounds’, which means that a court must order the tenant to leave the property. The remaining nine are ‘discretionary grounds’ and are more subjective. If the landlord cites a discretionary ground for eviction, the final decision as to whether the tenant has to leave will be made by the court.
You can read more about Section 8 notices and other relevant legislation in our landlord’s guide to UK tenancy law.
Although all landlords want to find (and keep) good tenants, it’s important to understand that sometimes circumstances do change. If your tenant wants to leave the property before the end of the term — for example, because they can no longer pay rent or have been offered a job in a different city — you can come to an agreement between you to end the tenancy early. However, landlords are not obliged to agree to an early termination, and tenants are liable for rent until you come to an agreement or their term ends.
One solution is for tenants to find someone — such as a friend — who wants to move into the property, which could save the landlord the cost and hassle of finding a new tenant. Landlords also sometimes charge tenants for the costs associated with finding a new tenant, such as the cost of advertising.
If you come to an agreement with your tenants, you can agree on a ‘surrender’, which is a voluntary agreement between both parties to end the tenancy agreement. Surrenders can be either express or implied.
Early termination FAQs
Below are the answers to a few FAQs about terminating rental contracts before the end of their term.
If the tenant moves out, do they still have to pay rent?
Tenants are responsible for paying rent for their entire fixed-term tenancy, whether or not they are living in the property. They can only stop paying rent if they use a break clause, or if you come to a mutual agreement.
What if the tenant doesn’t leave?
As a landlord, you can’t remove a tenant from your property by force. If you’ve issued a Section 8 notice and your tenants don’t leave by the end of the notice period, you can start the process of eviction through the courts.
What if one tenant wants to leave a joint tenancy?
Sometimes, only one person in a joint tenancy wants to leave the property. If the contract has a break clause, the tenant who wants to leave will have to agree with the other tenants to use it — which will end the tenancy for everyone. If the other tenants want to stay, they can ask the landlord for a new contract that doesn’t include their former roommate.
What if the property becomes uninhabitable?
In certain extreme circumstances, the property might temporarily become uninhabitable for your tenants — for example, if there’s a fire or flood in the building. As a landlord, you might want to consider including a habitation clause in your contracts, which states what will happen in this situation.
Normally, this means that the tenants won’t have to pay rent while the property is uninhabitable. It’s important to make sure you have the right landlords’ insurance that will cover you for loss of rental income in such an event.
Some rental contracts also include a ‘force majeure’ clause, which releases both parties from their obligations if there’s an unforeseen event that’s out of both parties’ control.
What if I want to move back into my property?
Landlords usually can’t ask their tenants to leave their property before the end of their fixed term in order to move back in themselves, unless they can use a break clause in the contract.
If you want to move back into the property, the easiest way is usually to wait until the end of the term, when you can issue a Section 21 notice. You don’t need to give the tenant a reason. You can also issue the notice before the end of the term, as long as you give the required notice period, and it ends after the last day of the tenancy.
The exception to this is if:
- You expressly told the tenants before the tenancy began that you may want to reoccupy the property at some point, and
- You or your partner have used it as your main residence at some time in the past.
In this case, you can issue a Section 8 notice, citing Ground 1. You can only do this if you or your spouse need to use the property as your main home.
Can I charge my tenants fees if they leave early?
The Tenant Fees Act sets out the fees and costs that a landlord can and can’t charge their tenants for. It allows for fees for early termination, so you can charge your tenants a fee if they choose to end their fixed-term tenancy early. However, this fee can’t exceed:
- The rent that would have been charged for the rest of the term
- The loss suffered by the landlord
- The agent’s reasonable costs for finding a new tenant.
In other words, you can only charge them for the actual costs you incur as a result of them leaving. A tenant’s obligation to pay rent also usually ends when a new tenant moves in and begins paying.
Fixed-term contracts and the limitations they impose are designed to protect all parties. While circumstances do sometimes change and either party might have a legitimate reason for wanting to end the tenancy early, it’s important to understand exactly what your obligations and rights are as a landlord, so you can be sure you’re operating within the law.
Article by Annie Caley-Renn
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