Selling a tenanted property?

As we’re sure you have experienced, selling a tenanted property can have its complexities. So, we thought it would be useful to recap a few of the important things to be aware of.

Landlords must let their tenants know their selling
Landlords must let their tenants know in writing that they’re selling the property. While most landlords know this, it’s worth mentioning to a vendor to double check it’s been done.

Taking photos for marketing material
A landlord can have photos taken of a tenanted property provided they don’t interfere with the tenant’s quiet enjoyment and right to reasonable privacy. This means, a tenant can refuse to allow the landlord to take and use photographs of their personal possessions – although often that’s not a bad thing given the state of the possessions!  If this happens, try and work with the tenant to organise for the possessions to be temporarily moved in order to take photos or the photos edited afterwards to achieve this effect.

Choosing a settlement date
If your vendor wants their tenanted property to be sold with vacant possession, the first thing to do is to check the tenancy agreement to confirm whether the tenant is on a fixed term or periodic tenancy as this will dictate when the settlement date can be.

If there’s a fixed term tenancy, the property cannot be sold with vacant possession until after the expiry of that fixed term (unless the tenants agree to end the tenancy early). This means if the vendor wants it sold before then, it will have to be sold with the tenancy still in the property.

If there’s a periodic tenancy, the property can be sold with vacant possession provided the appropriate notice is given by the landlord to end the tenancy.  Generally, landlords must give 90 days’ written notice to end a periodic tenancy, but there’s an exception where the property has been sold.  A landlord may give 42 days’ written notice ending a tenancy if they have an unconditional agreement for sale where they’re required to give vacant possession.

Giving appropriate notice may seem straightforward but you can get caught out.  We often see agreements state the settlement date is 42 days from confirmation of the contract.  While on the face of it this seems ok, it can be problematic for a number of reasons.

The first is that technically the tenant has until midnight on the date of the expiry of the 42 days’ notice to vacate the property. Secondly, it can sometimes be difficult to get in touch with the tenant to serve the notice which means the 42 days’ notice period starts a few days after confirmation of the contract.  Thirdly, where the nominated date for settlement falls on a non-working day, then the date for settlement is the last working day before the nominated day.  Additionally, it can also be problematic arranging the purchaser’s pre-settlement inspection.

For these reasons we suggest to our clients to provide a few days grace by nominating a settlement date at least 45 days from the date of confirmation.

Accessing the property to show through potential purchasers
Under the Residential Tenancies Act, a landlord (and their real estate agent) can show prospective purchasers through a property with the tenant’s consent. Tenants cannot unreasonably withhold their consent, but they may make their consent subject to reasonable conditions.  For example, tenants don’t have to agree to open homes or auctions on site and can insist the property be shown by appointment only and restrict the times during which viewing be done.

Because the tenant’s consent is required, communication is key.  Communicate often and as early as possible.  Where you can, keep a written record of any consent given, or follow up any verbal consent given in writing with a text or email.

If you’re selling a tenanted property and have any questions, feel free to give us a call – 04 390 2123.