Selling a Property With a Tenant in Place? Here’s What You Need to Know

Selling a property with preexisting tenants is a promising prospect for many landlords, particularly since it gives them a reliable income stream (rent) while they are looking for potential buyers. There are, however, legal requirements that must be met.

‘Vacant possession’ means that a property is handed over at settlement date free of occupants, personal belongings and legal claims. It can be harder to guarantee vacant possession, however, when a property is being sold while a tenant is still occupying the premises. This article will go over everything that landlords need to know to transfer a property over from a tenant to a buyer without any legal headaches.

Ending A Lease Period Before Settlement

Obviously, the tenant needs to have vacated the property with enough time before settlement to ensure that vacant possession requirements are met. It is also important to note, however, that a tenant on a fixed-lease is entitled to stay until the end of their term. Landlords cannot force a tenant out to make way for a buyer before the fixed-term lease has ended.

Landlords need to give their tenants a notice period that explains to them that the property is being sold, and gives them enough time to clear out and find another place to live. For periodic tenancies under the Residential Tenancies Act 1997 (ACT), the landlord is required to give the tenant 8 weeks’ notice to vacate. For fixed-term leases, the notice can be given at any time, but the termination date must be on or after the end of the lease term. Note that different rules may apply to commercial tenancies.

Prior Disclosure

The vendor must legally disclose any existing lease or tenancies in the contract for sale, and include the tenants’ lease agreement. All potential buyers must be made aware of the preexisting tenancy. Similarly, tenants should be informed of any plans to sell the property as early as practicable, in accordance with the relevant notice requirements under ACT law.

Inspection Rules

There are strict rules regarding inspection, as outlined by the Residential Tenancies Act 1997 (ACT). Inspections of the property by potential buyers must happen at reasonable times with the tenant’s agreement and require appropriate notice as prescribed by the Act. Inspection times are also restricted to 8am – 6pm Monday- Saturday, excluding public holidays, unless alternate times have been agreed-upon. The tenant may take legal action if the landlord or their agent enters the premises without proper authorisation or outside of the permitted inspection times.

Conclusion

It is possible to sell a property with a preexisting lease, but all legal requirements need to be met. If you have are a landlord that is considering this option and have any questions about the process, please do not hesitate to reach out. We are here to help.

DISCLAIMER: This article is for informational purposes only and does not constitute legal advice.