Ending a fixed term tenancy early – often referred to as “breaking a lease” – can result in a tenant having to pay the landlord some money, but it is not as simple as automatically owning the remaining months of rent. For example, if you move out of a rental unit two months into a one-year lease, your landlord cannot immediately apply for 10 months of rent as monetary compensation.
When a tenant breaks a lease, the amount of money owed is generally tied to the amount of money the landlord loses. However, the landlord also has a legal responsibility to minimize or mitigate their losses by taking reasonable steps to re-rent the unit. In other words, if you break your lease, your landlord should advertise your unit at a fair price, arrange viewings for interested tenants, and ultimately choose someone to replace you within a reasonable period. If your landlord loses rental income after making an honest effort to re-rent your unit without delay, you may have to cover some or all of their losses.
Disputes over broken leases often end up at dispute resolution. If your landlord failed to mitigate their losses by not taking reasonable steps to re-rent your unit, you can refuse to pay any monetary compensation until ordered to do so by a Residential Tenancy Branch arbitrator.
Common Lease-Breaking Scenarios
| Landlord Actions | Tenant Consequences |
|---|---|
| Landlord does not mitigate their losses by taking reasonable steps to re-rent the unit. | Tenant may not owe any compensation. |
| Landlord mitigates their losses by taking reasonable steps to re-rent the unit. They almost immediately find a replacement tenant at the same rent and lose no rental income. | Tenant may not owe any compensation. |
| Landlord mitigates their losses by taking reasonable steps to re-rent the unit. The landlord loses one month of rental income. | Tenant may owe one month of rent as compensation. |
| Landlord mitigates their losses by taking reasonable steps to re-rent the unit. They almost immediately find a replacement tenant, but settle for a lower monthly rent. | Tenant may owe the difference between the two monthly rents, multiplied by the number of months left on the term of the broken lease. |
| Landlord mitigates their losses by taking reasonable steps to re-rent the unit. They almost immediately find a replacement tenant at a higher monthly rent. | Tenant may be able to “set off” the difference between the two monthly rents, multiplied by the number of months left on the term of their lease, against any money owed for unpaid rent or damage to the rental unit. |
Exceptions
A tenancy agreement can contain a “liquidated damages” clause. If you break a lease that includes this type of clause, you may have to pay an amount of money, specified in your agreement, to cover the costs associated with finding a replacement tenant. A liquidated damages clause is supposed to be a reasonable pre-estimate of the cost of re-renting a unit – not a penalty for breaking a lease. This means that it cannot be unreasonably high, especially considering the number of free online advertising options available to landlords.
Since a liquidated damages clause is agreed to at the start of a tenancy, you may have to pay it even if your landlord does not lose any rental income as a result of you breaking your lease. However, if you think your liquidated damages clause might be a penalty, rather than a genuine pre-estimate of the cost of re-renting your unit, you can refuse to pay it until ordered to do so by a Residential Tenancy Branch arbitrator.
Resources
- TRAC Webpage – Breaking a Lease
- RTA Section 7(2) – Liability for not complying with this Act or a tenancy agreement
- RTB Policy Guideline 3 – Claims for Rent and Damages for Loss of Rent
- RTB Policy Guideline 4 – Liquidated Damages
- RTB Policy Guideline 5 – Duty to Minimize Loss
- RTB Policy Guideline 17 – Security Deposit and Set off
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