Buying a house with a tenant already in - Does their lease end?

Hi,

Have a quick question regarding buying a property as a FHB with a tenant already leasing. Is this lease immediately terminated as soon as we settle and they have to be out by moving date or do they have a right to stay and I'm not able to move in as soon as I would like to?

NSW - I would prefer to move into a place ASAP as it would be PPOR.

 

What's in the contract, is it a fixed term lease (with future expiry date) or periodic?

 

Last time I looked at Tasmanian legislation, the lease does not end on purchase. Check with the RE Agent in NSW but I believe it is the same. You have a couple of options:

1) purchase with settlement after the end of the lease with vacant possession - my prefered way of doing PPOR purchasing and the only way I would go;
2) purchase with tenant in place and wait for the end of the lease (when ever that is, need to find out) and/or end lease
3) negotiate with seller to pay tenant to leave early may be a possibility

Generally the lease remains despite the property changing hands. Talk to the RE Agent and seek legal advice on purchase to make sure you have not missed anything.

 

Sorry, it's a hypothetical question as I want to know what the rules are when purchasing a property that may have a tenant. I thought the majority of leases were on fixed term contracts. How long do they normally last?

 

Generally, the lease will prevail if the lease runs past settlement date, there are some exceptions. Check the Fair Trading websiteinfo sheets.

Leases are commonly 6 or 12 months for residential tenancies.

 

It all depends on the state and reasons for wanting to end the lease. In the ACT you have to give 26 weeks notice for no reason. If you want to sell that can be reduced to 8 weeks. As a buyer you need to check the sale contract. If you take on the tenant then you become subject to the same timings whether month to month or fixed. So even if the lease is about to end shortly after you settle you still may have a tenant in there for another 26 weeks.

 

There are a couple of possible scenarios here. You will need to check the Contract for Sale of Land to determine whether you have purchased the property subject to an existing tenancy or subject to vacant possession.

If you have purchased the property subject to vacant possession, then the tenant ought to have vacated by settlement. If the tenant has not vacated by the settlement date, then the seller will be in breach of the Contract for Sale. You cannot be compelled to complete the transaction until vacant possession is available.

In the event that you have purchased the property subject to the existing tenancy, then you inherit the lease and the tenancy on settlement. There should be a copy of the lease attached to the Contract for Sale for you to check. The tenant in this instance will not be required to vacate the property until the end of the tenancy, unless you are able to negotiate otherwise with the tenant. You will need to ensure that you commence residing in the property within the relevant timeframes for compliance with the First Home Benefits.

 

In Victoria, the lease overrides the sale contract. The tenants rights prevail and the lease must be respected - unless a "deal" can be made with the tenants, for them to break the lease.

 

If fixed lease you'll have to wait out the term on it. Or come to a mutual agreement with tenants to move (ie offer money)

If periodic then depends in whether sales contract stipulates vacant possession or not. Worst case scenario here is you can give them notice to go (rather than having to wait out the term if its fixed)