In January a landlord entered into an agreement to sell his property.  The property was subject to a fixed-term tenancy set to finish in early February, while the settlement of the sale, as agreed in the Agreement for Sale and Purchase, was to take place at the end of February.

Unfortunately, the landlord was unaware of changes to residential tenancy law that mean landlords can no longer rely on their fixed term tenancies to simply end on the appointed dates.

The landlord found instead that they needed to give the tenant 90 days’ notice to end the tenancy, which now automatically rolls over from fixed-term to periodic. 

Settlement of the sale could not occur until the property was free of tenants, and the landlord had to pay thousands of dollars in late-settlement fees, as well as the purchasers’ storage and accommodation costs while they waited to move into the property.

The recent changes to residential tenancy law mean that any fixed-term tenancy granted from 11 February 2021 must be terminated by a landlord with the same notice, and on the same grounds, as a periodic tenancy. 

The Residential Tenancies Act 1986 provides the reasons on which tenancies are permitted to be terminated.  One of those reasons must be stated in the termination notice given to the tenants.  If you are looking to sell your tenanted property, these reasons will likely be either that:

(a)  The property is to be put on the market for sale by the owner within 90 days after the termination date given in the notice; or

(b)  You are required, under an unconditional agreement for the sale of the property, to give the purchaser vacant possession.

For either of those reasons, the minimum notice period you would have to give to your tenant(s) would be 90 days.  In the case of a fixed-term tenancy, you would give the same notice and would have to make sure that the termination date stated in the notice is no earlier than the date appointed for the fixed term to end.

Outside of exceptional circumstances, such as physical assault by the tenant, a fixed term tenancy can only be terminated before the end of the fixed term if both parties agree.

Landlords must let tenants know they are putting their property on the market by giving their tenants written notice as soon as possible.  Although it may mean going without rent for a period between your tenants moving out and the settlement of the sale, you may wish to issue a termination notice before you enter into any agreement to sell.  That can help you avoid the penalties incurred by the landlord above, as well as not having to find a purchaser who will agree to wait at minimum another 90 days until settlement.

If you have tenants while marketing your property, note that you will need the tenants’ permission to access it to take marketing photos or conduct viewings, open homes, inspections, valuations, etc.  Marketing material that shows the tenant’s possessions also requires their permission before being published.

If you want your property to be considered by purchasers looking for their own home to live in, rather than purchasers looking for an investment property to rent out; your property should be sold with ‘vacant possession’, meaning there will be no one living in the property at settlement.

It is vital to take legal advice before selling a property, to avoid having to pay penalties if you get things wrong.


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Guy Goodwin