BUYING A TENANTED PROPERTY
Have you purchased an investment property with existing tenants? Property investors are sometimes unsure or even unaware of the implications in this scenario.
While the exact circumstances, as well as the relevant rules and laws in your state or territory, can influence how the process works and your obligations as the new owner, generally, if the property has existing tenants with a lease, you’ll be taking them on, at least until the rental agreement expires or you mutually agree to end it early.
How much notice you must give the tenants if you wish to gain vacant possession, depends on whether the lease is fixed term or periodic. Should the tenants wish to vacate early, vacant possession of the property can be negotiated, but can’t be enforced if they are in a lease.
Buying (or indeed, selling) a property with an existing lease involves critical legal steps to ensure that: 1. the buyer is aware of the details of the lease, and 2. the tenants’ rights are protected.
When you buy with the intention of keeping it as a rental, you might prefer to have the existing tenants remain if you are confident that they are good tenants who pay their rent and look after the home. There’s no vacancy downtime and the property generates an income from the outset.
What if you want to live in the property? In this scenario, you will need the tenants to vacate.
Firstly, tenancies can only be ended in accordance with the Residential Tenancies and Rooming Accommodation Act 2008.
ALWAYS seek legal advice prior to signing a contract, but here are some options to consider if you are buying a tenanted property that you want to live in.
You might wait until settlement has occurred and then give the tenants notice. The tenancy can only be ended at the end of the fixed term agreement, and the full 30 day notice period must be given.
You might insert a special condition in the contract requiring the sellers to give notice to the tenants where the tenancy agreement is due to end less than 30 days from settlement.
While tenants are legally entitled to remain in the property until the end of their lease, a buyer or seller may try to negotiate with the tenants to vacate the property early by providing an incentive to the tenant.
A more complicated option is where the prospective buyer might require the seller to provide vacant possession at settlement through having a special condition that allows the buyer to cancel the contract before settlement if the property isn’t vacant.
ALWAYS speak with a qualified professional when you need personalised advice.
SOURCE: RE/MAX Australia
