Hi,
We have recently received an offer from a prospective purchaser of our unit (after putting our unit on the market for sale for the past 8 months so we are keen to sell).
However the buyer wants to purchase only if we give "vacant possession". Our solicitor had prepared the contract of sale with the property being "subject to existing tenancies". We currently have a tenant in the unit but the lease has expired and the lease is going week from week.
Settlement/date of completion is the standard 42 days from the date of exchange. Our agent has told us we are legally only required to give 30 days notice to vacate to our tenant, so technically, it should be possible to deliver vacant possession by the date of settlement if all goes according to schedule.
Given the current market however, we are worried that the tenants will not find another place to rent in time (and we have an inkling they cannot afford any rental increase/and will not be on the "top of the list" as the preferred tenant for other properties).
We are worried if we exchange contracts and agree on giving "vacant possession", we will be at fault and will need to pay penalties/compensation to the purchaser (as discussed on other posts on this forum).
Is there anything we can do to mitigate any risk of penalty from our side (as the vendor) if there is any problems come settlement date?
Would appreciate very much any comments and advice as soon as possible (we have to decide very soon)!
many thanks
How quick you can get a tenant out depends on what state you are in – I believe it is 30 days for property sales in NSW and 8 weeks in the ACT. Not sure of other states. Surely the most prudent thing would be not to agree on vacant possession until you know that the tenants can be removed in time for the sale and that the tenants agree to move without the need for a court ordered eviction in time for the sale.
BTW, it is nice that you are taking the tenant's issues into account.
Thanks for your comments Ummester. Yes, agree prudent thing would be only to agree on vacant possession when we are sure that tenants will move out in time. However we do not have this timeframe. The purchaser is waiting for our answer as to the terms of the exchange of contracts. Our agent is saying we should only give notice to vacate after contracts have exchanged, so that we do not lose too much on rent and having the property vacant for a long period before we settle.
However, at the moment, it seems it may be better to lose out on a couple of weeks of rent rather than risk not being able to deliver vacant possession at time of settlement and therefore be subject to any risk of penalty/need to pay compensation to the purchaser….
Are our worries legitimate? or should we just "hope for the best" that tenant will move out in time and just agree to give vacant possession to the purchaser?
any comments would be great!
katelea,
I don't know legal ins and outs, just basic tenants rights in the NSW area.
Surely the tenants are aware that you plan to sell? Perhaps you should just approach them directly, or via the agent, to break the deadline to them. You sound like you have been a good landlord and, as long as your tenants are reasonable people, they should try and accomodate you. From the tenants POV, if you tell them now they get 42 days to find a new place rather than 30 (assuming you are in NSW).
Even if you serve the notice after the exchange of contracts the tenants can leave before the full 30 days so you may loose rent if they find something quickly anyway.
Also, if you serve the notice before the settlement and the tenants don't leave then you have done everything in your power to ensure vacant possession. Not sure of the exact laws but am fairly confident that you cant be found in breech of contract for tenants that fail to leave after they have been served a valid notice. It would be the new owners problem with the tribunal then, wouldn't it?
Only downside is that the contract fails, buyer can't get finance or something. In this case you could always go back to the tenant and offer them to stay till another buyer comes along.
Katelea, there are no penalties for (the vendor) not being able to settle on time – firstly, if you fail to settle the purchaser must issue a 'notice to complete within 14 days' ie you will get an additional 14 days grace before the purchaser can commence an action for specific performance.
Once the contract has gone unconditional, give the tenant the required period of notice. The tenant is free to leave with 7 days notice after you have given notice of the sale, so they may leave in the first week after notification or they may drag it out.
I am a tenant in this situation -> property sold and 30 days vacate premises 'vacate possession' notice given to me. Though there is no way I will be out on the date they require because of slow market / lots of renters looking. I was lucky to find and agree to move into a place just under two weeks after my vacate date. It just came on the market and current tenants still in there
I have no money to stay at a hotel for 2 weeks, no friends/family to stay with and nowhere to store my furniture / no money to put it into storage / no money to hire a removal truck twice in one month. So I only have one option…
I will just stay past the vacate date until I can move out. I will be fine as it will take them 2 weeks to get a tribunal date, then tribunal would give 5-20 days notice on top of that anyway. I'd be out before the tribunal date so nothing the real estate can do. But how will that affect the new owner / sale of the property? I've rung to let them know and they don't communicate or negotiate, very unhelpful so why would I go out of my way for them if they won’t come to a compromise…
My advice is to communicate with the tenant and come to an agreement. Otherwise if you keep them out of the loop they might not be able to find a place in time.
A few off topic related questions if anyone could please help:* Do you think I will be fine in my situation?
* If I stay past the date they served me to vacate premises can I get in trouble by law / forced out by police, do I get a record, / do I loose my bond / does going to tribunal go on record and cause complications for future renting / buying / getting a loan etc? – All my real estate has told me when I said I can't be out on time is I must be out and return keys by vacate date, but I’m sure I don't have to be and there is nothing they can do until tribunal.I'm a new home owner and just found out the tennant is refusing to vacate @ 20 days into his 30 days notice to vacate! Everything I've read is in favour/support of the existing tennant! What about us renters who have finally made it into the landlord ranks? We have to suffer because some less fortunate has not been able to enter the property market? GOD I'm pissed at being delayed to my dream!
Hi Move It (very appropriate name)
I feel your pain – it’s VERY frustrating! My only advice is to follow the processes, document everything and hopefully you’ll move into your new home soon.
Best of luck – it is annoying.
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
unhappydays – I am sorry but from a landlord point of view your post makes me cross. I am sorry that you have no outside support to assist you – but you do have options, you could move into a caravan park/backpackers/rent a room and store your belongings until you find accommodation. Yes that will involve moving your belongings twice – and it may mean you will have to wait a little longer to get your bond back and be in a position to move into another rental.
Your actions could jeopardise the settlement and cause financial loss to the seller & buyer, each of who are just normal everyday people stretching themselves to get ahead.
Yes you may not get a permanent black mark but it will be put on the real estate franchises internal list and I happen to know that local agents share information amongst themselves – so it could jeopardise your future rental applicationsunhappydays –
I agree with maree. What about instead thinking "how fortunate you are that there are people (ie landlords) prepared to take on mortgages in order to make rental accommodation available for those that do not have the means or desire to purchase their own homes?"
Have you considered that your landlord might be in financial distress him/herself (maybe the landlord's family has a new baby on the way, or a family member is ill and requires an expensive operation and they have to sell this property), and you are making a bad situation worse by refusing to move on time, claiming you have "no option" but to stay? I'm sure you have a friend or family member that could put you up for a week or so.
Taking on a rental property as a tenant means you have the convenience of deciding you don't fancy living there and in turn leaving, without the burden of a mortgage to the tune of several hundreds of thousands of dollars. But the tradeoff is that the landlord might need you to depart earlier than planned.
Just remember – it is not your property. Never was. You're renting it.
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
hi( unhappydays ) did you know that you local charities will help you with accommodation also help move your furniture for a small fee and lots of times for free but you must call around to the differant charties group or ask you local centerlink office they can help you as well even the local churches .i do understand your position some people dont have a spare dollar for moving but if you stay you will loose your bond and thats money you can not afford to loose (katelea) first do a little research find out what your local charities can do. and if you have the problum of your tennents not being able to move out on time. then you can tell your tennents of their options they will have no reason or excuse not to move
As harsh as this might sound, you got into investment properties to make money. And that should be your only concern. Of course you should sign the contract for sale with vacant possession in there, because legally it can be done. This will get the sale over the line, and thats the most important thing for you.
The plight of the purchaser, tenants etc etc are of no worry for you.
Just my 2 cents worth. I have IP’s spread over three states, treat them as a business venture, because that is what they are. Leave emotion at the kerb and think with your head / wallet
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