Tenants rights during and after sale of a rental property

Hi, I'm a bit green when it comes to the finer points of property law.

I currently own unit that is tenanted under a fixed term Tenancy Agreement in the ACT. I wish to sell the property, hopefully in a bouyant first home buyer market.

My tenants believe they have the right to sit out the remainder of the term even after the property is sold - i.e. the property is sold in a tenanted state so must remain so for the new landlord. This would limit my potential buyers to investors only rather than owner occupiers.

Is this the case? My interpretation of Section 259 of the Tenancy Act is that it is not?

Thanks in advance for any help

Andybob

 

Hi Andy

Can you reprint the section of the Australian act you're referring to?

From my knowledge, and please note that this is of NSW and QLD only (though I would have thought ACT was the same) you cannot terminate a fixed lease unless the tenant agrees and you have worked it out between you. This usually involves some form of compensation for putting the tenants out early, which is fair enough.

See this section from the OFT NSW Renting Guide site:

Notice periods
In the last 14 days of the fixed-term period of the agreement, either party can give 14 days notice to end the tenancy. This notice can be served up to and including the last day of the fixed term.

Once the fixed-term period has ended you are required to give at least 21 days notice. The landlord or agent must give you at least 60 days notice.

If there is a breach of the tenancy agreement, a notice period of 14 days applies.

If the landlord wants to sell the premises, you may be asked to vacate the premises by the time the sale is finalised. The landlord must give you at least 30 days written notice (after the contracts of sale have been entered into). This only applies after the fixed term has ended.

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I understand your reluctance to sell to a limited market, but there's always the option of offering to compensate your tenants should you wish to move them on early, or else offer an extended settlement to purchasers that takes it up to the end of the fixed lease agreement.

Best of luck

 

Hello Jacque,

Thanks for the reply! Like I said, I'm a bit green (this may be an understatement). No need to print the section; I have realsied this is just a general section that describes the period in which you must inform the tenant once you have entered into a contract to sell.

I believe you are indeed right. We have had advice from a real estate agent that the fixed term lease cannot be broken upon the sale of the property. This will limit our market to investors only unfortunately. We feel like dills actually, but I guess when we signed the lease, we were more interested in long term tenancy than finding new tenants for shorter terms. We weren't planning on selling at the time. Live and learn.

As for compensating the tenant, thanks for the advice again, we'll keep this up our sleeve. The tenants are pretty keen to stay on though, I think they’d be pretty miffed, and she's a young lawyer, so not sure if we want to open that can of worms unless we have to. If we can get enough for the unit from an investor we will sell. If not, we may just hold onto the unit.

The only reasons we want to sell are 1)that the unit is going to need some capital injection on our part in a few years to keep up with other units around it. Its also in an ageing complex and there may be more capital investment through body corporate fees. 2)good time to sell as my wife’s income this year was low due to maternity leave etc. 3)It would also help us to develop another property we own which has greater potential. 4)Its also a bit of a consolidation exercise in case Steve Keen's predictions come to fruition (even in part) and we are left a bit high and dry with high interest rates, and low rental returns…

Anyway, don’t mean to waffle, this forum gives me a platform to get my head straight…!

Thanks again for your help.

Andybob

 

Pleasure Andy
If you're really concerned about forecastors like Keen then why not lock in your interest rates when they're likely to go down yet again this year? I know many investors who are waiting until fixed rates reach lows of 5% or less for 3-5 yrs (or even 10yrs if we're lucky!). You can then at least mitigate one risk safely.

 

Cheers again for your reply,

Yep have thought of doing this, and we are in the process of at least locking our PPR loan in on lower rates. The IP's are a bit more complicated as we have interest only lines of credits set up for them, with all the rent coming into our PPR line of credit and then only min int payments coming back out to service the lines of credit. This helps us minimise our non tax deductable PPR loan with the cash flow positive IPs, and gives us immediate acces to funds for repairs etc...... I'm sure you've heard it all before...thanks again, we might just talk to the bank about a similar arrangement but with fixed lower rates....

Cheers
Andybob