Ending fixed term tenancy

Question from Jane updated on 21st December 2018:

We inadvertently labelled the Tenancy Agreement we gave our tenant fixed term. We did not cross out periodic term. But we verbally discussed with our tenant - prior to preparing the agreement - that we may have to move into the property if our business (where we also reside) sold. However, we did not expect business to sell in the next six to 12 months. Our tenant verbally confirmed they understood the tenancy to be flexible.

Now, we are about to sell our business and our place of residence. So we contacted the tenant to discuss ending tenancy. But they are very reluctant to negotiate ending the tenancy prior to the fixed term period ending. They say they are surprised that we gave them a fixed term Tenancy Agreement as they understood the tenancy to be flexible. We have offered the tenant two weeks free rent and over 42 days notice. However, if we cannot negotiate with the tenant to end tenancy early, how do we contact the Tenancy Tribunal and what grounds do we have to request early release? 

Our expert Jennifer Sykes responded:

Under the Residential Tenancies Act, a landlord or tenant in a fixed-term tenancy agreement cannot give notice to end the agreement before the end date, unless the premises is uninhabitable.

A fixed-term tenancy can only be ended early in the circumstances you describe if both the landlord or tenant agree to an earlier end date, or if the Tenancy Tribunal decides to end the tenancy because of a breach of the Act or tenancy agreement, for example non-payment of rent. The Tribunal could also decide to reduce the term of the tenancy in some cases if there has been an unforeseen change in circumstances, which would lead to severe hardship to either the landlord or tenant, and that hardship would be greater than the hardship the other party would suffer if the fixed-term was not reduced. If you are able to negotiate an outcome that is agreeable to all parties you should document the agreement in writing.

However, if you cannot agree, then either party can apply to the Tenancy Tribunal requesting a reduction of the fixed term tenancy. Evidence of the unforeseen circumstances and hardship that is greater than that of the other party must be included with the application.

If you believe that the fixed-term stated in the tenancy agreement was a mistake that was not intended by either party, then you could seek to have the Tribunal make an order to allow the tenancy to be ended. The Tribunal would need to be satisfied that this was a mistake and that in the circumstances it is fair. Any information you have to support this understanding should be included with your application.

For more information on the rights and responsibilities of landlords and tenants who want to end their fixed term tenancy earlier read this. You can also subscribe to our e-newsletter Tenancy Matters here.

The Ministry of Business, Innovation and Employment provides information and guidance on building law and compliance, services including weathertight homes, and advice for tenants and landlords.

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