Selling with Tenants

It can be a curly question:  How do you  sell a property while the tenants are still in place?

Retaining tenants during a sale certainly keeps the rental income coming in.  Also, unless the property is dirty and untidy, it will usually present better with furniture and household items making it look lived in and camouflaging wear and tear.

However, there are times when a tenant in residence could be a financially less rewarding scenario.

Tenants who do not want to move can put a lot of obstacles in the way of a sale. They can limit and postpone inspection access almost at whim in spite of legally having to provide ‘reasonable access’ (what is ‘reasonable’ to one person may not be ‘reasonable’ to another).   By the time this sort of obstacle is sorted out, valuable time has been lost and many purchasers have moved on.

Disgruntled tenants can also highlight the property’s faults in order to put off prospective purchasers. While many owners are happy to absent themselves from the property to allow the agent to show the purchasers around at their leisure and improve their selling prospects, tenants have no such motivation to leave the property and many stay watchfully present.

Sometime property owners have  no inkling that tenants will behave badly in the event of a sale, but there is a bit of basic research investors can do to try and determine whether their tenants will play ball.

Ask your agent how easy it has been for the agent to get access for periodic maintenance inspections or for tradespeople who have been contracted to carry out work on the property.

Tenants who have been slow to concede access for activities such as repairs that will benefit them are highly unlikely to come to the party when they think they will ultimately lose their home to a successful purchaser.

So what can you do to make the transition as smooth as possible for both yourself & the tenants?

Look after your tenant

Once you have made the decision to sell your property, make sure to ask your agent to advise the tenant straight away.  It is common for the agent and tenant to work out a reduction in rent for the duration of the sale period.  For example, you may offer a discount on the rent per week if the tenant ensures that the property is kept clean and vacates the property during the planned viewings.  Or how about the offer of a free week’s rent after the successful exchange of contracts with a buyer.

NB: Unless the tenant agrees, access is not permitted on Sundays, public holidays or outside the hours of 8am to 8pm.

It is not uncommon for tenants to decide to move out when they find out their rented home is being sold.  In NSW, if you didn’t advise the tenants when they signed the lease of your intent to sell, they have the right to break the lease, even a fixed term one.

Can I ask my tenant to leave?

If you have a tenant in place but prefer to sell the property vacant, it can usually be arranged.  Each state has its own laws, and your agent will be able to advise what your situation is.

Generally, the basic rule is as follows:

If your tenant has a fixed term lease, you cannot make them leave until the fixed term is up.  You also have to give them 14 days notice.  If you can’t wait for the end of your fixed term lease, then you’ll have to ask your agent to try to negotiate with them.  You could offer a period of free rent in exchange for their agreeing to break the lease.

If the tenant has already been in place past the end date of your fixed-term lease, they have what’s called a continuing agreement tenancy.   You may end this lease by giving 60 days notice.  Or, you can give them notice of your intention to sell when you start the process and then give them 30 days notice once your buyer signs a contract.  Just be sure your settlement dates comes after the tenant’s last day in the property.

Remember, if you want to sell your property but have tenants in place, be proactive and co-operative.

Keep in mind that the sale period can be just as stressful for them as it is for you.

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