Advertising a property for rent before settlement.

Is there anything preventing a purchaser from advertising a property for rent (on major on-line websites) before settlement?

Assume no special conditions have been written into the contract of sale.

 

Do you have any rights to access the property to show potential lessees?

 

I have no legal rights to enter the property. I am only looking to advertise about 1-2 weeks before settlement, which I think will be of help. Have done this in the past, and it enabled me to get a tenant very quickly, even though I could not do open for inspections.

 

No issue at all and a good idea as long as you have access to good photos (and permission to use them).

Wouldn't do it too early as listing can get stale

 

No issue at all.....this said I had a rider I had my conveyance insert into each purchase we made that guaranteed us access rights the Saturday 3 weeks out, 2 weeks out and potentially the last Saturday before settlement so that we had tenants ready to move into the property the day after settlement.

I was told by one property manager that technically they couldn't sign a lease before settlement (not sure if true or not....none of the others seemed to mind) but they got around that by having everyone fill out the lease in advance and send a "holding deposit" but not technically filing until after settlement.

If the property is costing you hundreds of dollars a day being empty.......makes sense to have tenants in there as soon as possible.

 

The agent is correct - you can only pass on lesser title to another person. If you haven't settled, you have nothing to pass on to a tenant.

Likewise, the term of a subtenancy can be the maximum of one day less than their lease.

 

You could enter a lease subject to legal ownership being obtained.
Its like entering a contract to purchase land from an executor before probate is granted. They have no legal ownership or rights until probate is granted.

 

I think this sounds good in theory but would be really painful in practice.

Eg
Offer lease subject to ownership being obtained
Tenant pays all the startup costs and signs contracts
Tenant moves in - pays removalists, pays connection fee on utilities
Settlement fails
Lease withdrawn based on ownership not being obtained
Tenant upset and damages property
Property still legally belongs to vendor
Head asplode

 

None of my IP purchases had the tenant move in before settlement.

 

I am sure I replied to this a few days ago but the post is missing.

I wasn't implying that the tenant move in before settlement. This wouldn't be possible on a contract conditional to legal ownership being obtained. The tenant would need to contract with the seller of the property before settlement.

 

Technically I believe you have no right to advertise the property prior to owning it. Also definitely illegal for agents to represent you as the owner of the property that you don't own (yet). The correct way for us to do it is to obtain an authority from the sellers to advertise during the unconditional period, not sure exactly how it works with private lessors.

This should all really be negotiated prior to going unconditional, along with early access and professional photos.

P.S. Reality is that most agents and owners advertise prior to settlement illegally, it's not widely enforced.

 

Tom, have you sought legal advice on this matter? If you advertise, what cause of action does the seller have? Breach of contract (re a contractual right that the seller has in the CoS)? Second, how is it misleading? If you say, ‘not available until such and such a date’, it strongly suggests settlement has not occurred. If you wanted to, you could even be more explicit in the ad and say ‘available after settlement date’.

 

Probably worth asking before we get more specific what state the property is in, and if you're expecting to use a Property Manager?

 

Victoria. Yes, a PM will be used.

 

Isn't issue with the seller, it's with the regulatory body- consumer affairs in VIC.

I've done some digging around with the help of @Lil Skater and it seems there is no clear penalty attached to acting without a valid authority in Victoria, only the threat of an undisclosed fine.

In QLD, acting without a valid authority attracts a maximum penalty of $26,110 from the Office of Fair Trading (our version of Consumer Affairs).

 

Tom, what particular Act or Regulation are you referring to? Can you provide a reference? Consumer Affairs are a regulatory body who enforce the law. They cannot just stop things because they don’t like something.

 

I've advertised many properties and signed leases and authorities prior to settlement.

Without being the legal owner of the property technically the agent can't accept a commission until you are the legal owner.

I ask for a contract of sale, photo ID, proof of current address (which should also be on the contract of sale). I also speak with the sales agent to confirm all is good, then proceed under instruction from the client.

I wouldn't bother advertising a property unless you can access it, wastes valuable marketing time and loses potential interested tenants. You'd also need agreement from the seller to use their photos (or permission from the photographer in some instances)/access for your own photos. I also ensure that the contract is unconditional before any advertising and allow a longer period between settlement and a tenant moving in case of any delays.

Basically, agent can advertise and act upon your behalf - there's nothing that says to the contrary in the Estate Agents Act, but you could be up s*it creek if it falls through. So could the agent, so it's a risk on both sides.

Some of the legislation in Vic is very much backwards in a sense that the Estate Agents Act, Residential Tenancies Act, the prospective regulations and VCAT act don't explicitly state some situations and it's more just a "common law" thing.

I should also note that I'm not advertising unless it's in the contract of sale, mainly to avoid the risk above. Effectively giving permission to advertise and whatnot beforehand even though there's nothing specifically written.

 

Serves me right for piping in before clarifying which state we're talking about.

In QLD, we are specifically not allowed to represent a property without a valid appointment to act- i.e. if it's under contract and we don't have an appointment to act with the sellers, we're not allowed to advertise it for the buyers until it settles. It's not just about the ability to collect commission, but the overall representation of the property on behalf of the Lessors. This is under the Property Occupations Act, enforceable by Office of Fair Trading.

I'm still surprised that this is not the case in other states, but there doesn't seem to be any particular mention of a similar penalty in Victoria.

 

There's a lot of consumer affairs and the Estate Agents Act about false representations and such, but there's nothing specific about having a written authority prior to legal ownership. Only about taking a commission without legal authority to do so, and the authority wouldn't technically be legally binding until the purchaser is the legal owner of the property.

It also says you cannot falsely represent the property, but again, doesn't say anything about legal ownership or the authorities. I guess one could say advertising a property which is not legally owned by XYZ could be a false representation - but it doesn't specifically state this.

It also goes on about how the property should be marketed, how an estate agent or agents representative should conduct themselves, but again, nothing specific surrounding the authority until you look at the commission side of things.

Now, I've never been in this situation myself as prior to doing any marketing it's always in the contract of sale with written consent of the vendor. Do you have written consent?

 

I would have a concern about
1. which images they used to advertise. (copyright)
2. persons poking around with smalll kids in the front yard.
I would prefer the prospective owners to check that this is ok before 'stepping on toes'