Bungendore Preschool be evicted from its current location at the end of the year after lease negotiations with the Bungendore Catholic parish broke down.
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In a letter to parents, Bungendore Preschool Association chair Joe Cashman said the preschool has been asked to vacate the Turallo Street premises by the end of the year.
"We understand that this news may come as a shock to you and your children, and we want to assure you that we are doing everything we can to make the transition as smooth as possible," Mr Cashman said.
"Although we may need to close our doors at the end of the year, we will continue to provide high-quality education to your children until that time."
Mr Cashman said a subcommittee would look to find a new location for the preschool.
The preschool association was awarded a $1.6 million grant from the NSW government in September in order to expand the facilities to provide another 60 places.
The grant money was to be used to add a building to the site with three extra rooms with a disability access administrative space, a laundry and a new staff room.
As part of the application, the preschool association was required to negotiate a 10-year lease with the landlord.
St Mary's Parish, which owns the property, sought to raise the preschool's rent by more than four times the previous rate to $39,800 per year.
The previous lease expired in December.
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Canberra Goulburn Archdiocese financial manager Helen Delahunty said negotiations had broken down.
"Negotiations that have been going on between the parish and the preschool have broken down even though there was good faith on both sides," Ms Delahunty said.
Ms Delahunty said it was the parish who was responsible for making a decision on the lease and that the archdiocese supported whatever the parish decided.
It is understood the association previously paid about $9000 in rent per year and paid for maintenance at the property.
Mr Cashman said the committee would keep parents informed of developments on the relocation of the preschool.
"We are grateful for your understanding during this challenging time, and we look forward to continuing to work together to provide the best possible education for your children."
The community preschool has been operating for 42 years.
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