Selling Tenanted Properties

If you’re selling a property which is currently tenanted, there are a number of things you should consider before putting the property on the market.

1. Is the tenancy fixed term?

If the property is on a fixed term tenancy, then you cannot unilaterally end the tenancy early. For a fixed term tenancy to be ended early, both you and the tenant must agree in writing.

You can market and sell the property while a fixed term tenancy is in place, as long as settlement occurs once the tenancy has ended. Alternatively, the purchaser may wish to purchase the property with the tenancy still in place. If this is the case, then the Agreement for Sale and Purchase must note that a tenancy is in place and that vacant possession will not be given on settlement. The purchaser will take over the tenancy and become the new landlord on settlement. A change of landlord form must be completed and returned to Tenancy Services.

It is important to remember that a fixed-term tenancy becomes a periodic tenancy if it ends and neither party has given notice and come to an agreement or the tenant hasn’t exercised their rights to renew the fixed term, if applicable.

 2. Is the tenancy periodic?

If the tenancy is periodic, you must give 90 days’ notice that the property is going to be sold and therefore the tenants will need to vacate the property. We often see agreements where the vendor is required to give the tenants 90 days’ notice upon the agreement for sale and purchase becoming unconditional. Ensure you keep this 90-day period in mind when deciding on the settlement date, otherwise it may impede on your settlement being completed.   

For people looking for a shorter settlement period, an alternative option is for the property to be purchased with the tenancy still in place. If the purchaser wishes to reside in the property or have one of their family reside in the property, they can give 63 days’ notice that the tenancy is to come to an end. This is only likely to be appropriate in certain circumstances, get in touch with our property team to see if this applies to you.

3. What else should you consider when selling a tenanted property?

It is important to recognise the inconvenience to the tenant of selling a rental property. Not only will the tenant need to find new housing, but they will also likely be expected to make the house available for photography, marketing preparation and viewings. Some landlords offer tenants a reduced rent during this process, however this is not required.

The tenant must give their permission for you and/or the Real Estate Agent to show people through the home. The tenant cannot unreasonably withhold their consent to these showings; however, they can require access to the house to be on certain days and/or times of the week, and they have right to be present at the property while these showings are conducted.

If the property is being sold while tenanted, then the purchaser does not have a right to a pre-settlement inspection. The tenants may still allow for a purchaser to visit the property for the purposes of a pre-settlement inspection but there is no legal requirement for the tenant to allow the inspection to occur. Furthermore, it is often easier for a purchaser to conduct the pre-settlement inspection without the tenant’s belongings there. We would recommend allowing enough time between the end of the tenancy and settlement for the pre-settlement inspection to occur undisrupted where possible.

If you are looking to sell your rental property and would like assistance, get in touch with our Property Law experts at TODD & WALKER Law.