Even though 2020 is such a strange year of epidemic, the real estate market in Auckland is super strong! 

Many property investors are active in the market and there are many rented properties that are also selling well on the market.

Many investors do wonder if they can sell their tenanted property successfully without much trouble from the tenants.

The answer is yes!

If you’re thinking about selling a tenanted property, you’ll need to decide whether to give your tenants notice before the sale starts, so you’re selling a vacant home, or allow them to stay so you’re selling a property with tenants.

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What happens if the new owner wants vacant possession?

  • For periodic tenancy: If the buyer doesn’t want the tenant to stay on and wants them to leave before settlement, it is your responsibility to give your tenant at least 42 days’ written notice to end the periodic tenancy so the house will be empty for the buyer. According to the newly passed “Residential Tenancies Amendment Bill” (effective on 11th February 2021), landlords must notify tenants 90 days in advance to terminate the lease.
  • For fixed-term lease: You can only give notice when the fixed term expires. Sometimes, if the tenant and the landlord both agree, the lease can end early. You as the landlord may give compensation in this case.

What happens if the new owner wants the tenant to stay?

  • If the buyer wants the tenant to stay, the agreement for sale and purchase should specify this. 
  • You need to notify the tenant of changing in ownership,  provide the tenant with the new owner’s lease agreement. 
  • You can collect rent until settlement day. If your tenant has paid rent in advance, you will need to pass this on to the buyer.
  • If the new owner decides to retain the tenant, retaining the same management company has great benefits of avoiding communication problems and reducing disputes.

Things to consider if you decide to sell a tenanted property

  • Clear, timely communication is critical.
  • You might consider reducing the rent during the sale period to recognise the inconvenience, or helping them to pay for cleaning services so that the property can remain in perfect condition.  
  • It’s essential to let your tenant know at the beginning of the process, so they are aware of their rights and responsibilities. 
  • You and your sales representative need permission from the tenant to access the house for photography, valuation, a building inspection, open homes and viewings.
  • You also need permission from the tenant before publishing marketing that includes any photos of their possessions.
  • If your sales representative and property manager are from different companies, you should inform the property manager before putting your house on the market for sale.
  • The tenant should get to know your decision of sale before putting your house on market.  Don’t let them know from the “for sale” sign in front of the lawn!
  • Make sure the sales representative keeps in touch with the property manager throughout the process.

The benefits of selling your property while tenanted

Selling a tenanted property is likely to be best for the tenants – they get to stay in their home for longer and may be able to continue their tenancy with a new owner. Retaining the tenants may make the property more attractive to someone buying a rental property – it shows it’s a viable investment, and they don’t need to spend time finding new tenants. The advantage to you as the investor is that your rental income continues throughout the sale period. 

Although there are certain benefits to buy and sell a tenanted property, it is undoubtedly an overly complicated process.  Selling a property can be stressful for all parties, especially for tenants. It is especially important to ensure you comply with the law and respect for the rights of tenants. 

At this stage, having a professional property manager is extremely helpful that can minimize the pressure and avoid unnecessary troubles for all parties. It’s likely you both want the same thing – a smooth process and clarity for your tenants about their home.