Are you looking to buy or sell a tenanted property? Perhaps you’re wondering how this will affect the settlement process?
Read on to find out how we can help you to understand your rights and obligations in these circumstances, in relation to residential property.
Let’s first look at the impact of selling a tenanted property.
For some properties, an ongoing tenanted property may be an attractive prospect for interested buyers.
For other properties, it might be preferable to offer up ‘vacant possession’. This means having the tenant move out before settlement or handover of the property to the new owner. Speak to your Real Estate Agent to see what strategy they recommend for your particular property.
You should also discuss with your Property Manager what kind of notice you are required to give your Tenant. You will need to advise them of the sale itself, and also give notice for home opens. If you intend to end the tenancy to allow for vacant possession you will need to check that this is permissible under your lease agreement.
The notice requirements will depend on the specific terms of your lease, as well as whether it is a fixed-term or periodic agreement.
The property is sold, and the tenant is staying on – now what?
Be sure to include a condition about the tenancy in the Offer and Acceptance Contract. This condition should state that the sale is subject to the Tenant staying on in the property. The Buyer should also agree as part of the Contract to honour the terms of the existing lease.
Under the Joint Form of General Conditions, you must ensure that the Buyer is provided with certain documents.
- a copy of the Lease Agreement
- the latest Property Condition Report
- a current Rent Statement
- any bond documentation
If you have a Property Manager, Metro Settlements will liaise with them on your behalf to obtain this information.
If you are buying a tenanted property, we will contact the Property Manager for you to obtain the required documents.
You will also need to advise us whether you are going to remain with the existing Property Manager. Alternatively, you may like to transfer the management responsibilities over to a new agency.
Do I need to use a Property Manager?
Unless you are particularly well-versed in the requirements of the Residential Tenancies Act, we would recommend engaging a suitably qualified Real Estate Agent to manage the property for you.
Their job is to know all the ins and outs regarding the lease as well as the rights and obligations of a new property owner, so that you don’t need to worry.
You can find your local REIWA Property Manager here.
What happens to the Tenant’s bond and rent payments?
As part of the settlement process, we’ll work with the Property Manager(s) to arrange for the necessary paperwork to be signed by the Seller to transfer the bond (held by the Bond Administrator) from the Seller’s name into the Buyer’s name as the new Landlord.
We’ll also arrange for the apportionment of the rent which covers the settlement date. The Seller is entitled to all rent up to and including the Settlement Date. The Buyer is entitled to all from rent from the day after the Settlement Date.
Will this cost me more for my settlement agent to do this?
Unlike some other settlement agencies, Metro Settlements does not charge an additional fee for work involved in transactions with a tenanted property.
Metro Settlements will advise the Property Manager once settlement has taken place. Buyers will need to notify their Property Manager of the account details for the future rent to be paid to.