How to Sell a Rented Property or End a Tenancy Agreement?
If you are an owner wanting to sell your rental property while it is under a tenancy agreement, there are certain steps and requirements that you need to consider to end a tenancy agreement.
Vice versa, if you are a tenant and you find yourself in a situation that the owner is considering selling the property that you rent, you need to be aware of your rights and obligations.
The questions and answers below will go over some common scenarios and highlight each parties’ requirements. We have also included some suggestions that will hopefully assist with making the transaction as pleasant as possible.
WHAT DO I NEED TO DO TO SELL MY PROPERTY THAT HAS A TENANT?
If you currently have a tenant in the property, then there are certain steps that need to be taken and minimum notice periods that will apply. The below will go over those steps.
1.1 Selling the property
When you first decide that you want to sell your property, you need to make sure that your tenant is provided a “Notice of lessor’s intention to sell premises”. This form will cover the basic details of the people involved (the owner, tenant and selling agent), as well as information on how you plan to market the property.
If the selling agent is a different person to the property manager then the selling agent is required to give the property manager a copy of each entry notice before entering the property. Further, you will only be able to have an open house or on-site auction if your tenant has agreed to this in writing.
It is also required that the property manager and owner ensure that the tenant has ‘quiet enjoyment’ of the property. This means that the tenant is entitled to have reasonable peace, comfort and privacy, in addition to being able to make full use of their property while the property is being marketed.
1.2 Once the property is sold
Once you have sold your property, an ‘attornment notice’ (which is most commonly a letter) must be provided to your tenant, informing them of the new property owner, their details and where to pay rent to. A “Change of property manager/owner” form must also be given to the Residential Tenancies Authority for the bond.
If the tenancy agreement that you are in is a fixed term agreement, you may not force your tenant to leave solely because you want to sell your property. Your tenant is entitled to stay at the property until the end of the agreement and the new property owner will take on that tenancy agreement that was in place prior to them taking ownership of the property.
If the tenancy agreement is a periodic agreement and the purchaser of the property requires there to be no tenants in the property, you will be required to give the tenant a “Notice to leave”. This also requires a minimum of four weeks’ notice from the signing of the contract of sale.
It is important to note that the minimum timeframes can only be changed or reduced if all parties agree to it in writing. We touch more on this below.
2. WHAT IF I WANT TO END A TENANCY AGREEMENT EARLY?
As a tenant, you may wish to end the tenancy agreement early if you are considering moving elsewhere or you have recently purchased your new home. As a tenancy agreement is a legally binding document, there are specific guidelines regarding the way tenancy agreements can be ended. This includes using specific forms and observing the relevant time periods.
The most common instance and ways for a tenancy agreement to be ended are as follows:
- The landlord and the tenant reach an agreement for the tenancy to come to an end on mutually agreed terms. More information about how this can be handled is below.
- The tenant gives the landlord a “Notice of intention to leave”. If you are ending your tenancy early or ‘breaking the lease’, you may have to pay reasonable re-letting and advertising costs and you are still responsible for the payment of rent until the property is re-let.
However, the property manager and the owner must mitigate any loss associated with you breaking the lease. This means that:
- the property manager/owner should not be re-advertising the property for a higher amount of rent; and
- if the property manager/owner receives an offer to rent at a lower rate than what you are currently paying, you should be given the option to ‘top-up’ the rent for the balance of the term instead of rejecting the offer outright and holding you to account for rent for the full length of the tenancy agreement.
3. HOW CAN I REACH AN AGREEMENT TO END A TENANCY AGREEMENT EARLY?
We recommend organising a time between the owner and the tenant and simply having a meaningful conversation about what you intend to achieve and if there is anything that you can do to assist to relieve the other person’s inconvenience.
We have set out some situations that may be helpful if you find yourself wanting to end a tenancy agreement early.
3.1 As the owner of the property
Most tenants appreciate a frank and respectful discussion with the owners directly. The feedback that we receive is that most tenants are told that the property is being sold by a sales agent, usually a person they have never met or spoken to before. Put yourself in your tenant’s shoes, it is not hard to imagine that by being told that you need to move out of your home by a stranger is not likely to gain you any favours from your tenant.
Quite often we find that simple solution can be found if the parties can communicate openly and honestly. Some other suggestions that could assist in this situation are as follows:
- Offer a rent reduction to your tenants for the duration of the marketing campaign.
- Offer to pay for your tenant to go out for a meal or to the cinemas during open homes.
- Compromising on a new end date for your tenancy agreement that is suitable for both yourself and the tenant.
3.2 As the tenant of the property
Similar to the above, it can make a significant difference if you are honest and open when discussing with the owner of the property ending your tenancy agreement early.
Some suggestions that could assist in this situation are as follows:
- Discuss the situation at the earliest opportunity and try reach an agreement that works best for both of you.
- Keeping the property in a clean and tidy condition for inspections and allowing flexibility for open homes to find a new tenant.
- Compromising on a new end date for your tenancy agreement that is suitable for both yourself and the owner.
For more information regarding the process of selling a property that has a tenant in it, or end a tenancy agreement early, please refer to the Residential Tenancies Authority.
If you require assistance from our conveyancing department in the purchase or sale of a property or with your tenancy agreement, please do not hesitate to contact Lydia at our office on 1300 749 709 and we would be pleased to help you.