Selling a property with tenants in it

Before listing your property, you must determine whether the tenant is on a fixed-term lease or a periodic agreement. If a fixed-term lease is in place, the sale does not automatically terminate the tenancy; the buyer will take over the property as a landlord until the lease expires. In a periodic agreement, you may be able to provide notice to vacate, but the timeframe varies significantly by state, ranging from 30 to 90 days. Check with your local tenancy authority to confirm the exact requirements for your specific location.

Investors often find tenanted properties attractive because they provide immediate rental income from day one, avoiding the costs associated with finding a new occupant. However, owner-occupiers may be deterred if they cannot move in immediately upon settlement. You should consider your target buyer profile before deciding whether to sell the property tenanted or vacant. If you choose to list your property directly on Home24, you can highlight these rental yields to potential investors while saving on traditional agent commissions that typically range from 1.5 percent to 3.5 percent.

State laws dictate how and when you can enter the property for valuations, photography, and open homes. In New South Wales and Queensland, for example, you must provide written notice, often referred to as a Notice of Intention to Sell, before any inspections can occur. The required notice period for the first entry usually ranges from 14 to 28 days depending on the state, with subsequent inspections requiring at least 24 to 48 hours of notice. Failure to provide correct notice can lead to legal disputes or fines.

Most jurisdictions limit the number of inspections you can hold per week, typically capping them at two. You should consult with your tenant to find mutually agreeable times rather than simply enforcing your legal minimums. Keeping a record of all communications regarding entry is essential for compliance. If a tenant feels their right to peace and privacy is being breached, they may apply to a tribunal for an order to limit entry, which can significantly hinder your sales campaign and timeline.

A cooperative tenant is one of the most valuable assets during a sale process. They are responsible for keeping the property clean and allowing access, but they are not legally required to stage the home or hide their personal belongings. To encourage their help, many owners offer incentives such as a temporary rent reduction of 50 to 100 dollars per week or a week of free rent upon a successful sale. These gestures can motivate tenants to keep the property in a presentable state for potential buyers.

Open and honest communication is the best way to prevent friction. Inform your tenants of your intention to sell before they see a sign go up in the front yard. Explain the process clearly, including how many inspections you anticipate and what the likely timeline will be. Providing a professional cleaning service once a week during the campaign is another effective incentive that ensures the property looks its best while reducing the burden on the tenant who is living in a high-pressure environment.

Marketing a tenanted property presents unique challenges, particularly regarding photography. Tenants have a right to privacy, and in many states, you cannot take photos that identify the tenant or show their private possessions without their express consent. If the tenant's furniture is cluttered or dated, it can negatively impact your listing's performance. Consider using virtual furniture or wait for a day when the tenant is out to take photos of empty rooms if they are planning to leave before the first open home.

Professional photography costs usually range from 300 to 800 dollars, depending on whether you include floor plans or drone shots. If the tenant refuses to allow internal photos, you may be limited to using external shots or older photos from when the property was vacant. Be aware that using old photos can be misleading if the property's condition has changed significantly. Clear communication about the photography process and ensuring no sensitive information is captured will help maintain a positive relationship with your tenant.

When a tenanted property is sold, the new owner assumes all the rights and responsibilities of the previous landlord. The security bond must be transferred to the new owner via the relevant state bond authority. This process requires a specific form signed by both the old and new owners. It is vital to ensure this paperwork is completed during the settlement process so the tenant's bond remains protected and correctly attributed to the new property owner.

Any prepaid rent must also be accounted for in the settlement adjustments. Your conveyancer or solicitor will calculate the exact amount of rent owed up to the day of settlement. The buyer will then receive a credit for any rent paid by the tenant that covers the period after the settlement date. It is a common mistake to overlook these adjustments, which can lead to disputes between the buyer and seller post-settlement. Always confirm these figures with your property manager or via your own rental records.

A common mistake is failing to verify the current state-specific laws regarding 'no grounds' evictions or sales-based terminations. Laws have recently changed in several states to provide tenants with more security, meaning you might not be able to ask a tenant to leave just because you are selling. Another error is neglecting to inform the tenant in writing that the property is under contract. Keeping them in the dark can lead to a breakdown in communication, resulting in a property that is poorly presented during crucial final inspections.

Prose checklist for a successful tenanted sale: Check the lease expiry date and type, issue the formal Notice of Intention to Sell, discuss an inspection schedule with the tenant, offer a rent reduction or cleaning service, ensure the tenant's privacy is respected in all marketing, and notify the bond authority immediately after settlement. By following these steps, you minimise the risk of tribunal applications or delays. Always seek professional advice from a qualified conveyancer or solicitor to ensure your specific contract of sale correctly reflects the tenancy status.