Purchasing a Property with Tenants

For many of us, purchasing a home is one of the most significant financial decisions we will make, and we absolutely want to get a decision as important as this RIGHT. If you are looking to purchase a property with existing tenants and convert it to your principal place of residence, then there are additional circumstances and steps to consider to ensure your expectations are met.

A rental agreement, whether it is a fixed or periodic agreement, does not automatically cease once a rental property is sold. Instead, following the settlement of the property, the new owner will become the landlord and be bound by the same duties and obligations to the tenant(s) as the previous landlord regardless of who signed the original rental agreement. Similarly, the tenant’s obligations to the new owner will remain unchanged.

Consequently if you are buying a property with existing tenants and intend to continue renting out the property, then you must ensure that you familiarise yourself with the tenancy laws, the existing rental agreement, and you notify the Residential Tenancies Authority for the change of bond details.

However, if you intend to terminate the existing rental agreement and use the property as your principal place of residence, you will need to seek specific legal advice and ensure that the existing tenants have been notified that the property is for sale, and provided with a valid Notice to Leave.

Under the Residential Tenancies and Rooming Accommodation Act 2008 (Qld) a tenant must be given 2 months to vacate the property once provided with a Notice to Leave. This is irrespective of the settlement date for the purchase. However, if the tenancy is under a fixed term agreement, the tenant is not obliged to leave the property until the last day of their fixed term. Your conveyancer may be able to negotiate with the seller for vacant possession and/or include special clauses in the contract to ensure that you are promised vacant possession following the settlement.

If you are considering purchasing a property subject to a rental agreement, ensure you speak with your conveyancer and obtain independent legal advice prior to signing any contract for sale or purchase.

Mahan Nouri, Solicitor at Zande Law, Located at Suite 9 Norwinn Centre, 15 Discovery Drive, North Lakes, is the author of this article, practising in the area of Property Law, Wills, and Estates.

The information in this article is merely a guide and is not a full explanation of the law. This firm cannot take responsibility for any action readers take based on this information. When making decisions that could affect your legal rights, please contact us for professional advice.

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