QCAT Appeal Tribunal overturns compensation award in break lease dispute

A recent decision of the Queensland Civil and Administrative Tribunal Appeal Tribunal has provided an important reminder for property managers about the risks associated with informal agreements.

In On Q Properties Pty Ltd t/as Define Property Agents v Keast & Anor [2026] QCATA 52, the Appeal Tribunal overturned an earlier decision which had awarded tenants their full bond plus $4,000 compensation following a dispute about an informal early lease termination agreement.

On Q Properties Pty Ltd t/as Define Property Agents v Keast & Anor [2026] QCATA 52

The tenants leased a property in Sippy Downs under a fixed-term tenancy, which was due to expire in July 2024. Prior to the expiration of the tenancy, the property owners decided to sell the property and discussions commenced between the property manager and the tenants about the possibility of the tenants vacating early to facilitate a sale with vacant possession.

On 5 February 2024, the tenants advised the property manager by email that they would consider vacating the premises prior to the expiration of the lease, providing a suitable replacement property was found and their relocation costs were covered. The managing agent advised the tenants via email that the owners would agree to those conditions. On 20 March 2024, the property was ultimately sold while the tenants remained in occupation. The new owner-occupier did not require vacant possession prior to settlement and arranged alternative accommodation.

Several weeks later, when the tenants located another rental property and sought confirmation that they could vacate the property early without penalty, the managing agent stated that any early departure would constitute a break lease unless the new owner separately agreed. Subsequently, the tenants issued a notice of intention to leave and vacated the property approximately six weeks before the lease expiry.

Original Magistrate Decision

At first instance, the Magistrate concluded that the email exchange on 5 February 2024 constituted a binding agreement between the parties, whereby the original owners had agreed to permit the early termination of the lease and pay for relocation costs.^[1] The Magistrate found that the tenants were allowed to terminate early without penalty and awarded the tenants the return of their full bond and an additional $4,000 compensation.^[2]

Appeal Tribunal Findings

On 2 October 2024, the property manager made an application to appeal the Magistrate’s decision on the grounds that the Magistrate had erred in assuming the existence of a binding agreement and had denied the parties procedural fairness.

Observing that the Magistrate had not allowed either party to give substantive submissions at the hearing,^[3] and that the Magistrate had appeared to have formed a view before the commencement of the hearing,^[4] the Appeal Tribunal concluded that “the learned magistrate denied the parties procedural fairness by their refusal to allow the parties to make submissions”.^[5]

Ultimately, the Appeal Tribunal granted leave to appeal the decision and dismissed the tenants’ original application. The Tribunal found that the Magistrate had incorrectly treated the parties’ February email exchange as an ongoing enforceable agreement, despite non-compliance with an essential term of that agreement.

The Appeal Tribunal accepted that the proposed early termination agreement was fundamentally linked to assisting the owners to achieve a sale with vacant possession.^[6] Once the property was sold subject to the tenancy, an essential term of the agreement could not be satisfied, and no valid agreement was in place.^[7]

The Appeal Tribunal also considered that the tenants had been clearly informed by the property manager in April 2024 that an early termination would constitute a break lease and that “the tenants ought reasonably to have been aware the early termination agreement no longer applied.”^[8]

Ultimately, it was concluded that there was no valid agreement in place at the time the tenants issued their notice of intention to leave and their departure constituted a break lease. In those circumstances, the Appeal Tribunal set aside the Magistrate’s decision and dismissed the tenants’ original application for compensation.^[9]

Conclusion