Key things to know when selling a property with a tenant – for landlords and tenants!

Special rules are in place to protect tenants living in a property which is sold  by the landlord during a tenancy.

Vendor’s rights and obligations

Landlords/vendors owe particular obligations to a tenant when selling their Property.  The following are key points for a Vendor when selling a tenanted property:

  • a full copy of the Tenancy Agreement must be attached to the Contract for Sale;
  • the tenant(s) must be given 14 days written notice prior to the first inspection and then no more than 2 inspections per week with 48 hours notice on each occasion (or as agreed by the tenants);
  • if a fixed term tenancy remains in force, the Property must be sold “subject to tenancies”; and
  • if the fixed term has ended and the tenant is on a holdover arrangement, the Vendor may provide 30 days notice to terminate the tenancy (if the Purchaser is requiring vacant possession).

The rights of a tenant

For tenants receiving notification that their rental property is to be sold, there are a few key considerations to keep in mind:

  • as noted above, tenants must be provided with 14 days written notice before the first open inspection, and note the number of inspections which can be carried out per week;
  • termination by the tenant without penalty:
    • if the Landlord did not disclose prior to the Tenancy Agreement an intention to sell the property and there is a fixed term agreement in place, then a tenant can terminate with 14 days written notice without penalty; or
    • if in a periodic agreement, this can  be terminated without reason with 21 days written notice.
  • if the property is sold and the fixed term remains on foot, then the purchaser on Completion of the sale becomes the new landlord (but all other aspects of the agreement remain the same).

The main focus of the above requirements is to allow tenants sufficient time to find a new place to live if required and to allow the quite enjoyment of the Property.  In many instances, Vendors will offer a rent reduction to compensate tenants for any inconvenience experienced and as a gesture of goodwill.

Vendors need to allow sufficient time in the lead up to marketing their property to ensure that no delays are experienced in the sales campaign.  ClickLaw can assist Vendors navigate their way through the conveyance of a tenanted property.  If you want more information click on the link below.