January 23, 2023
Buying or Selling a property with tenants? Here’s what you should know
If you’re buying or selling property with tenants in Queensland, you are probably wondering what happens to the lease once the property is sold.
The short answer is that the lease will continue after the sale, with the new owner taking over the rights and responsibilities of the previous owner.
Buying or selling a property with an existing lease involves critical legal steps to ensure that the buyer is aware of the details of the lease, and the tenants’ rights are protected.
Selling A House With Tenants In It
If you are selling a rental property, you or your representatives must take steps to disclose the sale to the tenant and the lease to prospective buyers. These include;
- Giving the tenants written notice that the property is being sold. This should be done with a Notice Of Lessor’s Intention To Sell Premises (Form 10). An Entry Notice (Form 9) must also be given to the tenant, prior to or at the same time as the Form 10, and again each time access to the property is required. For more information, contact the Residential Tenancies Authority.
- Declaring on the contract of sale if the property is not being sold with vacant possession. This involves noting details of the tenancy, including the term, end date, tenants names, and property manager, on the contract.
Buying A House With Tenants In It
Buying a tenanted property involves taking over the existing lease from the previous owner. This means the Buyer will inherit the rights and responsibilities attached to the rental agreement.
During the contract period, part of your conveyancer’s job is to make contact with the property manager to arrange the apportionment of rent money at settlement.
What If I Want To Live In The Property?
If you are purchasing the property as an investment and intend to hold it as a rental property, you might prefer to have the tenants remain.
However, if you are buying the property as a place to live, you probably want to have the tenants vacate.
Tenancies can only be ended in accordance with the Residential Tenancies and Rooming Accommodation Act 2008. This means, among other things, that written notice must be given in the proper form, and the correct notice period must be observed.
The Queensland government made significant changes to the law in 2022, and a residential tenancy, whether it is a periodic agreement or a fixed term tenancy agreement, can now only be ended for specific reasons after a two month notice period or the end of their fixed term agreement, whichever is later.
Below are some options to consider when purchasing a tenanted property that you wish to live in. Remember you should always seek legal advice prior to signing a contract, and don’t rely on boilerplate special conditions without having a lawyer review them to ensure they are suitable for your particular situation.
1. Wait Until After Settlement And Then Issue Notice
One option is to wait until settlement has occurred and then give the tenants notice as the new property owner. However, the tenancy can only be ended at the end of the fixed term agreement, and the full two month notice period must be given.
2. Insert A Special Condition Requiring The Seller To Give Notice To Tenants During Contract Period
If the tenancy agreement is due to end less than two months from the settlement date, it might be possible to insert a special condition in the contract requiring the sellers to give notice to the tenants.
This will minimise the amount of time the new owners have to wait to move in to their new property. It is important to note that sellers will not normally agree to give notice until after the contract is unconditional.
3. Require Vacant Possession Prior To Settlement
It might be possible for the prospective buyer to require the Seller to provide vacant possession at settlement. This would involve this inclusion of a special condition allowing the buyer to cancel the contract sometime prior to settlement if vacant possession isn’t provided.
The issue with this option is that if settlement is before the end of the two month notice period or the end of the fixed tenancy agreement, whichever is later, the seller would have to attempt to negotiate with the tenant to end their tenancy early, or risk losing the contract.
4. Negotiate With Tenants To End The Tenancy
Agreement Early
Although tenants are legally entitled to remain in the property until the end of their lease, a buyer or seller can attempt to negotiate with the tenants to vacate the property early.
Obviously the tenant does not have to agree; the buyer or seller might have to provide an incentive to the tenant to end the tenancy before they strictly have to. Any agreement reached should be put in writing.
Stamp Duty
Buying a property with tenants in it might effect your eligibility for the principal place of residence transfer duty concession.
If you wish to claim the concession, the existing tenants must vacate the property within six months of the settlement date, or when their lease expires, whichever occurs sooner. Please seek legal advice in relation to your eligibility for any transfer duty concessions, as other requirements apply.
After The Sale
After purchasing a rental property, the tenants must be provided with with written notice letting them know that the property has changed hands, the new owner’s details and where to pay rent.
More Questions?
If you have any questions about buying or selling property in Queensland with a tenancy agreement in place, or any other aspect of conveyancing law in Queensland, contact one of our friendly, expert conveyancing solicitors today.
The above is not legal advice and is general information only
