Payment plans upon settlement : rent arrears

Admittedly this is the first time it's happened to me. What happens in Settlement if the tenant is on a payment plan for rent and for water.

Does the balance get transferred to the new owner or is it completely up to the seller to sort it out

 

Important bit to remember is: Rent up until settlement day belongs to the seller and rent thereafter belongs to the buyer.

Sometimes the seller will write it off as not much recourse available. Or if there's a payment plan in place, that continues until they've caught up til settlement date even if the plan takes them past this date. The buyer will also be expecting rent in this period though, and often the tenant can only afford to pay one.

 

prop is in SA, so its DTs area of expertise

obviously rent up to settlement is the sellers, thats pretty obvious
however after, what happens?
lets for arguments sake say $500 outstanding
rent $200 per week, $50 per week repaymemts

can you agree for the buyer to add that into settlement, or legally is it $200 is the buyers and $50 is mine after settlement, however if they dont fwd me the $50, I have to go to tribunal to get it back

 

The debt and the judgement belong with the vendor. Why would the purchaser want to take on your debt from a bad tenant?

 

Calculate rent owing up to settlement day, payment plan can continue up to that value, but hard to enforce. They can continue to paying to person 1s account while paying full rent to person 2s account.

If i was the buyer in that scenario I'd ask for vacant possession, let the seller deal with the headaches.

 

I know what you are saying, but like a broken window or a leaking tap, you are buying as is, why don't arrears count

You might also Inherit a crappy tenant or neighbour

 

Yep got it.. So my original hunch is correct,, hard to enforce but I'm legally entitled to arrears after settlement.

Kicking out a tenant becuase of a small arrears seems extreme to me

 

You said $500 on a $200 property in your example above, thats 17 days in arrears, would have issued a breach notice 2 days ago. If you dont stay on top of these things its spirals out of control.

 

Landlord policy will not be valid if there are rent arrears at settlement.

This affects the buyer. Since arrears exist at day one (for the vendor) it affcets buyer so their policy may be valueless for rent arrears cover

The vendor may have access to LL cover if its insured

 

Yeah that was my example but it was a mixture of rent arrears and water arrears

 

Sorry to jump in but what if previous tenant, since evicted is on a payment plan for arrears and property damage? Can the vendor still enforce such an arrangement for a property they no longer own?

 

yes - recourse might be limited though. Eg probably don't have access to bond or insurance in that scenario.

We have an umbrella policy with Barclay that covers all our properties - they would probably assist (if you have a court order or were willing to get one).