Selling a rental with tenants requires a number of additional requirements the owner and agent must abide by to ensure tenant rights under Legislation are met. While these requirements initially may seem onerous, by keeping a tenant “in the loop” with timely communication, any issues can be dealt with before they become insurmountable problems. There are pros and cons to selling a tenanted property:
- Rental income continues while the property is on the market.
- Buyers benefit from purchasing a tenanted property – reducing costs such as letting fees and time vacant after settlement.
- Potential buyers see the property as “rentable”
- Increased legislative requirements for notice to tenant
- Reduced flexibility for opens
- Possible lack of control over the standard of presentation of the property
- Potential buyer pool – buyers after vacant possession may not be interested
A successful campaign of a tenanted rental keeps the tenant “in the loop” before, during and after the sale. A tenant who does not know what is going on, is uncertain of their future, or is kept in the dark with open times and notice will likely not be accommodating with access to the property for opens.
So, how do you do this?
Notice of Sale
It is a requirement before entering a residential tenancy agreement to advise a prospective tenant if owners have or intend to advertise the property for sale. A tenant can terminate a tenancy if the owner enters into a contract for the sale of the property within 2 months after the start of the tenancy agreement and did not inform the tenant of this intention.
Issue Correct Notices within Required Timeframes
On deciding to sell a tenanted rental property, an owner must advise the tenant with at least 14 days written notice they have entered into a sales agency agreement. Advertising the property or access to the property for the purpose of showing prospective purchasers cannot occur before this 14-day timeframe expires.
Once the initial 14 days has passed, the right of entry to the property for opens is outlined in the Act. These requirements include no more than 2 occasions within any 7-day period, at a time previously arranged with agreement of the tenant. If an agreement cannot be reached, at a time within normal working hours with reasonable notice. Reasonable notice is not defined, but at least 7 days minimum is advised.
Once the property is sold, the tenant must be advised in writing within 14 days or as soon as possible after the contract of sale is entered into of the name of the purchaser and the date from which rent is to be paid to him or her.
Remember, the tenant has a right to stay at the property during any open inspections, including on auction day. The tenant is also entitled to the quiet enjoyment of the property – continuous driving past or prospective purchasers walking around the property may not meet this requirement.
SA Listings tips:
- Start an open and honest dialogue with the tenant as soon as the decision to sell the property is made.
- All notices MUST be served in a timely manner, erring on the side of caution.
- Provide the tenant with a complete schedule of inspections as soon as possible.
- Any property manager MUST be in the loop with the decision to sell, plus the intended schedule. Consider combining routine inspections with other required access (such as photo sessions) in order to minimise tenant disruption.
- Consider a small rent reduction throughout the campaign. This will show the tenant you are conscious of the disruption to the tenant’s enjoyment of the property.
- Stay flexible. The tenant must not unreasonably refuse to allow access. However, be prepared and willing to negotiate access times.
SA listings will happily arrange for all of the above requirements to ensure your sale campaign runs smoothly. We also partner with experienced property managers who understand the needs of both tenants and landlords throughout a sales campaign.
Planning and preparation is needed. But if done, there is no reason the sale of a tenanted property should not go smoothly. Contact us for more information.