Join Australia's most dynamic and respected property investment community

Purchaser wants to rent property before settlement

Discussion in 'The Buying & Selling Process' started by Tillie, 27th Sep, 2015.

  1. Tillie

    Tillie Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    248
    Location:
    Melbourne
    Has anyone rented the property to a purchaser before settlement? What would you do if someone makes the following offer?

    - 6 months settlement but if the property is available earlier he would like to rent it
    - willing to pay higher purchase price and market rent

    What I was worried that if you rent it out and e.g. Purchaser causes damages or find faults during tenancy and then demands them to be fixed before settlement. Is there any legal ways to create the clause for the contract that 'final inspection' takes place at the time the lease commences and purchaser is responsible for all repairs and maintenance after that.

    Anything else you would recommend?
     
  2. See Change

    See Change Timing Lord Premium Member

    Joined:
    18th Jun, 2015
    Posts:
    2,140
    Location:
    Sydney
    Which state ?

    Can you put in clauses saying they would be responsible for maintenance etc from the time they move in until settlement ?

    If they are asking delayed settlement id want a large deposit , not just the token ones that sometimes gets used in q'land

    I'd be more concerned as to why they want delayed settlement . What are their circumstances ? Is money locked up somewhere ? Do they have to sell first ?

    What happens if they move in , then don't have the funds to settle . That would be a real mess...

    Theres a property I'd like to buy , but it would be dependent on us selling elsewhere .

    Thinking of asking for an option . Eg 2-3 months for a few thousand , which comes off sale price if we go ahead .

    Check with them and see if there's another option .

    Better option would be a six month settlement and if it becomes vacant , can bring settlement forward .

    Check with your solicitor .

    Cliff
     
  3. Tillie

    Tillie Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    248
    Location:
    Melbourne
    Here is some more info. The purchaser has already sold their PPOR and they are currently renting it month by month. Not sure how long they are able to rent it.

    The purchaser is expecting other one of his properties to settle (IP) in March hence he is asking 6 months settlement. I suppose he is upsizing and need proceeds from both deals to buy a new one.

    The propert is in Victoria. Offer includes deposit of 10%, standard in VIC
     
  4. KateAshmor

    KateAshmor Victorian conveyancing lawyer Business Member

    Joined:
    25th Jun, 2015
    Posts:
    74
    Location:
    Melbourne
    Not recommended to allow a purchaser in prior to settlement when they are relying on a third party deal to be completed. It would be very difficult to get them out if settlement fell through.

    The purchaser should obtain a bridging loan, like many people do in this situation.
     
    Ezzo and Greyghost like this.
  5. MGF

    MGF Well-Known Member

    Joined:
    13th Aug, 2015
    Posts:
    403
    Location:
    QLD
    I'm interested to know if this type of thing is possible (from the buyer perspective). Someone I worked with made an offer and then rented -- at the end of the year the seller backed out!

    We've been talking about doing it for the PPOR we want to buy. Having rented for a number of years we both know how you only discover certain things about a property by living in it.

    Interested in perspectives. If you were selling, would you do it?
     
  6. Scott No Mates

    Scott No Mates Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    5,544
    Location:
    Sydney or NSW or Australia
    It's not a 'try and buy' situation - once the cooling down period expires there's no backing out for the purchaser.

    How did the vendor get out of the contract?

    Was it a breach by the purchaser? Vendors cannot simply change their minds and rescind the contract.
     
  7. drg86

    drg86 Well-Known Member

    Joined:
    25th Jun, 2015
    Posts:
    273
    Location:
    Newcastle
    I made an offer on a property earlier this year with the condition I could move in and paint before settlement (paying market rent). Vendor wouldn't agree (government sale) so I bought elsewhere and that place sat on market vacant for about 8 months. They missed out on maybe 30k with that decision, and the place was trashed so didn't have much risk unless I burnt it down.

    If I was selling I'd agree to it, just the same as a tenant only better as they will own it. With a large deposit released and insurances in place don't see why not.
     
  8. D.T.

    D.T. Adelaide Property Manager Business Member

    Joined:
    13th Jun, 2015
    Posts:
    5,571
    Location:
    Adelaide, SA
    Access before settlement: sure I don't mind.
    Advertise and show tenants through: ok if you're careful.

    Rent before settlement: no way José. Its just adding another party to the potential problems list.
     
  9. DaveM

    DaveM Adelaide Buyers Agent & KFC Strategist Business Member

    Joined:
    14th Jun, 2015
    Posts:
    2,096
    Location:
    Sydney & Adelaide
    Not sure if anyone read the OP's posts correctly. The purchaser has already sold their PPOR and is renting it back but does not know how long this can continue on for.

    The purchaser wants to rent their new PPOR that they are purchasing off the OP for 6 months till settlement.

    In this situation I would allow it, on a fixed term 6 month with no extension allowed, with an inbound inspection.