Purchasing in NSW - Vacant posession

My sister is currently in the process of buying a property. Settlement is in 2 weeks time (original settlement was extended by 4 weeks at request of the vendor).

Now the contract has marked "Vacant Possession", obviously if the property isn't vacant she won't settle. However I am wondering if there is a get out clause for the vendor if she doesn't settle due the property still being tenanted.

 

Well after 14 days she can issue a notice to complete on the vendor. After that she can terminate. Maybe thats what the vendor wants?

 

Hey neK,

I checked online and if the vendor still has a tenancy agreement in place with the tenant, they legally they are suppose to give them 30 days notice. Your sister may want to find out if that's the case..

Here's the link I read:

How much notice the landlord must give
This depends on the type of tenancy agreement and the grounds for termination (if any) – see table below.

A fixed-term agreement is for a specified period (e.g. 6 months). A periodic agreement is one where the fixed-term has expired or no fixed term is specified.

If a termination notice is posted to you, the landlord/agent must allow an extra 4 working days for delivery.

http://www.tenants.org.au/factsheet-10-landlord-ends-agreement

Also will your sister be looking to get a Granny Flat added like you've been doing?

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Start small. Be consistent. And watch massive change take hold.

 

That's my concern. My sister has no intention to terminate the contract, she wants the property. I am concerned if the vendor is playing games (maybe because the market has risen and they have another buyer lined up and are hoping we terminate... who knows.... its just the paranoia in me that's kicking it).

We've spoken to the solicitor and they've said should the place is not vacant, we don't settle and issue notice to complete. While generally speaking, contract is contract, what i am interested in knowing is whether or not people have heard of situations where random stunts were pulled.

I'd rather be pro-active and counter all of those before they happen.

Also, come settlement, if we need to cancel due the vendor not fulfilling their duties, is there a settlement penalty fee for wasting everyone's time? If so is that billed to each party and it would be up to our side to claim from the vendor?

 

Hey Tyrone,
I've checked with my property manager and he said the same thing.
If come settlement date and its not vacant (and for whatever reason notification was not given to the tenants), its 30 day worse case we would need to wait. Assuming the tenant complies of course.

Again its just me being pedantic and considering the worse possible scenarios - eg. I was informed the tenant was pregnant, so if they pull the "we just had a baby" and argue they want to stay, it might make it harder to evict them.... especially if the property manager haven't done their job and informed them on time.

As for Granny Flat, i believe my sister's fiance wants to, but my sister says no. Its her PPR. She wants the whole backyard for her dog

(Though if she built a GF in the area, it would fetch minimum $600 per week - The plan is actually to do a knock down rebuild in a few years time).

 

Update:
Settlement booked on 2 July 2015.
Tenant was given notification and scheduled to move out on 4 July 2015.
Tenant has requested an extra week.

Vendor told property manager that the extra week is up to the new owner's discretion.

Ummm... wtf.
Anyway have informed solicitor, they will be contacting the vendor's solicitor and making it very clear that the contract is vacant possession and that it MUST be vacant on 2nd otherwise we are not settling.

I have no idea how some people think its ok that a tenant stay on for a further 2 days after settlement.... idiots!

 

Geez that's crazy but there are people out there like that...

Good that you have found out. In a fantasy land, you should get the solicitor to charge the vendor extra for not having the tenant moved out by the 2nd July.

If the tenant wants to stay, they would have to negotiate with you and therefore would have to start paying rent from the 2nd July onwards to you. Wonder if it's worthwhile for them to do this?

Lucky you've got to the bottom of this as well.

 

Renting out a property for a short period becomes a convoluted mess in my opinion. The risk vs reward doesn't stack up.

1. You can't see what condition the property was suppose to be when the tenant moved in. What you saw upon inspecting the property at open house may not match the ingoing inspection report.
When it comes to arguing rentals, it comes down to what is written in the ingoing inspection report... and from experience, most a done quite poorly.

2. Trying to get the rent paid to the person. Given my experience so far with this agency, I would almost expect them to pay the rent to the previous owner because the admin person probably isn't the sharpest tool in the shed.

3. What if the tenant becomes difficult and doesn't want to move out. As the new owner, this becomes your problem... and frankly its not worth it.

4. Tax implications. While minor, seeing this property is going to be my sister's PPR, my opinion is that it would be cleaner if it was a PPR from Day 0. Otherwise i will need to pro-rata all calculations (even if it is a few days/weeks).

http://www.djcaccounting.com.au/html/downloads/Tax Tools - Capital Gains Tax- Home exemption 6 yr rule.pdf

Extract from the 6 year CGT exemption rule

 

For me, even when buying IP's. I much prefer vacant possession.
This way i can go in, fix up what i need, rent it back out at a higher price.

 

Solicitor can put forward that settlement to be delayed till tenant moves out?

 

I called the agency and the director deal with the issue (as the agent who sold us the property no longer works there).

He spoke with the vendor's solicitor and settlement has now been postponed until after the tenant moves out.
Glad it was caught and resolved early

 

^ ^ Yes, this.

 

Yep. This is also why I do a pre-purchase inspection ON settlement day.... not before but on the day to make sure its all to my liking.
If not, settlement is either delayed or money withheld.

My last purchase the owner left their junk in the garage... i withheld $1,000.
He was there the next day to remove it.

His excuse was - "council collection is coming up in 2 weeks, i thought we could settle and I would then come move it to the kerb in 2 weeks time".

I wasn't taking that risk. Most people when they have their money, they are gone and will never return.