NSW Compensation for Breach or Termination

Landlords and Tenants may be entitled to compensation if the other party breaches the tenancy agreement or the terminates the tenancy before the end of a fixed term.

This guide covers landlords (or head-tenants) and tenants (or sub-tenants) in a Residential Tenancy. This applies to the majority of share accommodation and residential property rental situations. To confirm it covers your situation visit What is my share accommodation situation?

Can the landlord be compensated?

The landlord may be entitled to compensation in a number of circumstances where the tenancy is terminated. Generally, tenants will only have to compensate the landlord if they have breached the agreement or have unlawfully terminated the tenancy. Read the various scenarios below to see which one may apply to your situation

Termination before end of Fixed Term

1. Tenant lawfully terminates agreement

If the tenant lawfully terminates the agreement (e.g. because the landlord has breached the agreement) then the landlord is only entitled to rent up until the termination date. The landlord is not entitled to any other compensation for lost rent.

2. Tenant unlawfully terminates agreement

If the tenant unlawfully terminates the agreement by abandoning the premises (i.e. they leave the premises and stop paying rent), then the landlord will generally be entitled to compensation. The amount of compensation depends on whether or not the landlord and tenant agreed to a break fee in the residential tenancy agreement (clauses 41 and 42). To increase certainty for both the landlord and tenant, it is recommended that they agree to a break fee before entering the tenancy agreement.

  • Break Fee set in Agreement - if the fixed term is less than 3 years the amount of break fee depends on when the tenancy is terminated:
    • 1st half of fixed term - if the tenancy is terminated in the first half of the fixed term, the break fee is 6 weeks rent
    • 2nd half of fixed term - if the tenancy is terminated in the second half of the fixed term, the break fee is 4 weeks rent
  • No Break Fee - if there is no break fee agreed to, then the Tribunal determines how much the landlord can be compensated by the tenant. In this situation, the landlord can generally be paid up to an amount equal to the rent for the remainder of the fixed term. The landlord must make a reasonable effort to mitigate their losses, however. This means that the landlord must try to find a new tenant for the premises. If the landlord does find a new tenant, then the old tenant will only have to pay compensation for rent up until the new tenancy agreement begins.

If a Break Fee is included in the tenancy agreement, then the tenant cannot be required to pay any more than the fee for lost rent.

3. Landlord terminates agreement because of breach by tenant

If the landlord terminates the tenancy because the tenant has breached the agreement, the amount of compensation that the landlord is entitled to depends on how serious the breach by the tenant is:

  • Minor Breaches - if the landlord terminates because of a minor breach of the agreement by the tenant (e.g. small rent default or a few late rent payments) then the landlord will normally only be entitled to the rent up until the termination date. The tenant will not be required to pay compensation for lost rent up until the end of the fixed term. If the tenant moves out before the termination date, they will not be required to pay rent for the period between moving out and the termination date.
  • Significant Breaches - if the landlord terminates because of a significant / fundamental breach, or because the tenant has indicated that they no longer want to be part of the agreement, then the landlord will be entitled to compensation for up to an amount equal to the rent for the remainder of the fixed term. The landlord must make a reasonable effort to mitigate their losses, however. This means that the landlord must try to find a new tenant for the premises. If the landlord does find a new tenant, then the old tenant will only have to pay compensation for rent up until the new tenancy agreement begins.

Whether a breach of minor or significant depends on the circumstances of each tenancy. If you in this situation, you should seek legal advice about your specific circumstances.

4. Landlord unlawfully terminates agreement

If the landlord terminates the agreement in a way not allowed by law, they will not be entitled to any compensation for lost rent. The only amount they will be entitled to is the rent until the termination date. If however the tenant moves out before the termination date, they will not be required to pay rent for the period between moving out and the termination date.

Termination in Periodic Tenancy or After End of Fixed Term

1. Tenant terminates agreement correctly

If the tenant terminates the agreement correctly (i.e. uses the correct form and gives at least 21 days notice), then the landlord will not be entitled to any compensation. The only amount the landlord can receive is the rent up until the termination date.

2. Tenant terminates agreement incorrectly

If the tenant terminates the agreement incorrectly (e.g. gives less than 21 days notice), then the landlord will be entitled to compensation. The amount of compensation is the equivalent of 3 weeks rent from the day when the landlord is notified that the tenant has vacated the premises. The tenant must also pay rent up until the termination date.

3. Landlord terminates agreement

If the landlord terminates the agreement, they are generally not entitled to compensation for lost rent. The only amount the landlord can receive is the rent up until the termination date. If however the tenant moves out before the termination date, they will not be required to pay rent for the period between moving out and the termination date.

Reletting Fees

If the tenant unlawfully terminates the agreement before the end of the fixed term, or the landlord terminated because of a significant breach by the tenant, then the tenant may be liable to pay a reletting fee. A reletting fee is not compulsory, and the Tribunal will only order the tenant to pay one if the circumstances require it.

Can the tenant be compensated?

If the landlord unlawfully terminates the agreement before the end of a fixed term, the tenant may be entitled to compensation for part of the costs of moving out the rented premises and into other accommodation. These costs might include removalists, utility connections and the bond. The amount of compensation will usually be greater if termination occurred earlier in the fixed term.

Back to NSW Ending the Tenancy Agreement


These legal guides provide a brief summary and introduction of the laws and regulations affecting share accommodation. They do not cover all cases in all legal jurisdictions and might not apply in your specific share accommodation situation. It is important that you use this information as a guide only and seek independent Legal Advice or consult the Relevant Acts. We do not accept any liability that may arise from the use of this information.