When purchasing a property with an existing tenant, it's essential to understand the rights and responsibilities that transfer to you as the new owner. The presence of a tenant impacts various aspects of property ownership, from when you can take possession to how rental agreements are managed. Properly navigating these factors can help ensure a smooth transition and avoid potential legal or financial issues after settlement.
Where a property is sold subject to an existing tenancy, any tenant occupying the premises will remain after settlement is complete, continuing to pay rent to the new owner. The new owner will be unable to move into the property until the tenancy agreement period ends or the tenancy is lawfully terminated.
All terms contained in the tenancy agreement will apply to the Buyer from settlement date onwards. Buyers should review any tenancy agreement documentation.
While the Seller warrants that the statements made in the Contract regarding residential tenancy agreements and rooming accommodation agreements are true and correct, it is important that Buyers are aware of any formal or informal tenancies in the Property in the past 12 months as this may affect the rental they may recover after settlement, and Buyers may have a right to compensation if this was not correctly disclosed in the Contract.
Rent for each residential premises comprising the Property may only be increased once per year. This applies even if there is a change in owner and tenant, or there is no existing tenancy in place for the Property.
A tenancy may have been granted in the past 12 months on all or part of the Property on an informal basis, i.e. where a residential tenancy agreement was not signed by the parties, and the amount charged for rent was below market rent. Such an informal tenancy arrangement may still fall within the definition of a ‘residential tenancy agreement’, and therefore affect the amount of rent Buyers may be able to request for the Property, until the expiry of 12 months from such prior informal agreement (if that was the last rent increase). While the Seller warrants that the statements made in the Contract regarding residential tenancy agreements and rooming accommodation agreements are true and correct, it is important that Buyers are aware of any formal or informal tenancies in the Property in the past 12 months as this may affect the rental they may recover after settlement, and you may have a right to compensation if this was not correctly disclosed in the Contract.
Sellers should not modify the Property in any way after the Contract Date including terminating any tenancy in place, otherwise the Buyer may be able to terminate the Contract or claim compensation.
Disclaimer: Every property transaction is different, and the information provided may not be relevant to your circumstances. By using this site you agree that the information provided is for general purposes only and does not constitute legal, financial, or professional advice.
