- Legal Obligations: Adhere to state-specific tenancy laws and provide required notice periods.
- Tenant Cooperation: Ensure open communication and respectful negotiation with tenants for inspections and showings.
- Market Limitations: Recognise that selling with tenants primarily appeals to investors rather than owner-occupiers.
- Lease Agreements: Understand that new owners will inherit existing lease terms, which could affect the sale.
- Incentives: Consider offering incentives to tenants for their cooperation during the sale process, especially if it’s a tough rental or selling market, and they’ve been good to you and your property.
- Get expert advice: Enlist the help of your property manager, selling agent, and conveyancer who will be able to help with the process and legal framework.
Generally it involves a similar process to selling a property more broadly, but with the added consideration of working with your tenants to get access to the property.
This guide will provide insights into the process, legal considerations, and tips for selling a tenanted property in Australia.
Tenancy Laws in Australia - Know Before You List
When selling a tenanted property, landlords must provide tenants with appropriate notice. This notice period varies depending on the state and whether the lease is fixed-term or periodic. For example, in Victoria, tenants must be given 60 days' notice if the property is sold with vacant possession.
Here’s a detailed breakdown of the requirements for inspection notices across the country:
Australian Capital Territory (ACT)
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Legislation: Residential Tenancies Act 1997 (ACT)
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Notice for Entry: Landlords must provide tenants with at least 24 hours' notice for property inspections.
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Selling Notice: If the property is being sold, tenants must be given 14 days' notice before it is listed for sale.
New South Wales (NSW)
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Legislation: Residential Tenancies Act 2010 (NSW)
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Notice for Entry: Tenants must be given at least 14 days' notice before the property is put on the market. For inspections, 24 hours' notice is required.
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Selling Notice: Landlords must give tenants 30 days' notice if the property is sold and the new owner requires vacant possession.
Northern Territory (NT)
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Legislation: Residential Tenancies Act 1999 (NT)
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Notice for Entry: Tenants must be given at least 24 hours' notice for property inspections.
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Selling Notice: There are no specific additional notice requirements for selling a property; standard notice for entry applies.
Queensland (QLD)
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Legislation: Residential Tenancies and Rooming Accommodation Act 2008 (QLD)
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Notice for Entry: Tenants must be provided with 24 hours' notice for property inspections.
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Selling Notice: If the property is sold with vacant possession, tenants must be given 4 weeks' notice.
South Australia (SA)
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Legislation: Residential Tenancies Act 1995 (SA)
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Notice for Entry: Landlords must provide tenants with at least 14 days' notice before the property is advertised for sale. For inspections, 24 hours' notice is required.
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Selling Notice: If vacant possession is needed, tenants must be given 60 days' notice after a sales contract has been signed.
Tasmania (TAS)
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Legislation: Residential Tenancy Act 1997 (TAS)
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Notice for Entry: Tenants must be given at least 48 hours' notice for property inspections.
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Selling Notice: If the property is being sold, tenants must be given 14 days' notice before it is listed for sale.
Victoria (VIC)
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Legislation: Residential Tenancies Act 1997 (VIC)
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Notice for Entry: Landlords must provide tenants with at least 24 hours' notice for property inspections.
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Selling Notice: Tenants must be given 60 days' notice if the property is sold with vacant possession.
Western Australia (WA)
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Legislation: Residential Tenancies Act 1987 (WA)
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Notice for Entry: Tenants must be given at least 24 hours' notice for property inspections.
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Selling Notice: There are no specific additional notice requirements for selling a property; standard notice for entry applies.
Communicating with Tenants
Open and honest communication with your tenants is crucial. Inform them of your intention to sell the property as soon as possible. Clear communication helps in building trust and can make the process smoother.
Discuss how the property will be marketed and negotiate times for inspections that are convenient for both parties. Work with your tenants to schedule inspections at convenient times. Provide adequate notice for all inspections, adhering to the legal requirements in your state. Aim for minimal disruption to the tenants' daily lives.
Tenants who feel respected and involved in the process are more likely to cooperate with any requests.
Open Home Expectations
Open houses can be challenging when the property is tenanted. Consider scheduling multiple smaller, private viewings instead. Always ensure tenants are aware of these viewings well in advance. Most of the time, the tenant is under no obligation to fastidiously tidy up before viewings.
When to Offer a Sweetener
To ensure tenant cooperation, consider offering incentives such as a rent reduction during the sale process or assistance with moving costs if they need to vacate. Incentives can help maintain a positive relationship and smooth the sales process.
Selling with Tenants vs. Vacant Possession
When deciding to sell a tenanted property, you have two primary options: selling with tenants in place or selling with vacant possession.
In the end it comes down to effort and costs, compared to market appeal. Each option has its own set of advantages and challenges, and the best choice depends on your specific circumstances and target market.
Assess Your Target Market
If the property is in an area popular with investors and has a strong rental yield, selling with tenants in place might be more advantageous. On the other hand, if the area is more attractive to owner-occupiers, achieving vacant possession could maximise your market appeal.
Owner-occupiers, who might want to move in immediately, might not be interested in properties with existing tenants. This largely limits your market to investors only.
Properties sold with tenants can be very appealing to investors who want to start earning rental income immediately without the hassle of finding new tenants. Having tenants in place also provides evidence that the property is desirable and can generate steady rental income, which can be a strong selling point.
On the flipside, investors might expect a lower price due to the perceived inconvenience or risks associated with inheriting tenants and lease terms. At the end of the day it’s all a toss of the coin and it’s impossible to assume the intentions of a potential buyer.
Flexibility
When selling while tenanted, the property will not sit vacant, which eliminates concerns about potential damage or security issues that can occur when a property is unoccupied. Home insurers will generally limit vacancies to 60 days to mitigate risk.
With staging and renovations, selling untenanted grants the flexibility to stage the property or make any necessary renovations or repairs without coordinating with tenants. Scheduling inspections and open houses is also simpler without having to negotiate with tenants, allowing for more frequent and convenient viewing times.
Cost and Income
When selling while tenanted, you continue to receive rental income up to the point of sale, helping to cover mortgage payments and other expenses.
When selling a vacant property, you will lose rental income once the tenants vacate, which can be financially challenging if the property takes a while to sell. You will be responsible for all property-related expenses, including mortgage payments, utilities, and maintenance, during the vacancy period.
Tenant Relations
If the current tenants have a fixed-term lease, you may need to negotiate with them to vacate early, potentially offering incentives such as moving assistance or rent reductions. If the current lease terms are favourable and the tenants are cooperative, selling with tenants could be smoother.
Legal notice periods must be adhered to, which could delay the sales process if not properly managed. The new owner must honour the existing lease agreements, which might include rent rates below market value or other unfavourable terms.
Successful sale requires tenant cooperation for property viewings and inspections, which can be challenging if the tenants are not accommodating. If the lease terms are unfavourable or the tenants are uncooperative, it might be worth considering achieving vacant possession before selling.
Final Steps
Selling a property with tenants requires careful planning, clear communication, and a thorough understanding of legal obligations.
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Legal Documentation: Ensure all legal documentation is in order, including lease agreements, property condition reports, and any agreements made with tenants regarding the sale process.
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Settlement: Coordinate with your real estate agent and legal representatives to ensure a smooth settlement. Keep tenants informed about the timeline and any changes that might affect them.
By respecting tenant rights and working collaboratively, you can achieve a successful sale while minimising disruptions for all parties involved.
For more detailed advice tailored to your specific situation, consult with a local real estate professional or legal advisor.
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