As investors, there will come a time when you decide to “cash up” and sell some of your portfolio.
When the time comes to sell your investment or rental property, there are some important processes to follow to ensure the best possible outcome.
Personally, I recommend selling when your property is free of tenants. Tenant expectations and motivations are usually the exact opposite of what you, the owner, wants when you’re selling.
If you are selling your own home, there’s a mad rush before each open home to ensure the lawns are mown, the gardens are trimmed, and the house is warm, cosy and immaculate. The smell of freshly baked scones and brewing coffee permeating the air, soothing classical music is gently playing in the background.
Not so your tenants! Even the very best of tenants will never present the home in its best possible light and will usually not be as flexible with access as a motivated owner-occupier vendor.
However, your empty rental property can often be transformed with a few cosmetic touch-ups and then dressed by a professional, often adding thousands of dollars to the sale price.
If you must sell your home with the tenants in residence, there are some rules I urge you to follow. Some of these rules you are legally obligated to follow, others are suggestions and common courtesy which will help facilitate the best outcome for everyone.
Selling a property can be stressful for all parties. To minimise the impact, keep the lines of communication open.
Our experienced sales agents ensure the landlord, the property manager and tenants are all on the same page and aware of what's happening with the sale of the property.
Tenants can be very sensitive to any lapse in communication, but when shown professionalism and respect, they usually respond in kind.
I have seen disastrous consequences of tenants not being shown respect and empathy from inexperienced sales agents.
Your tenants must be provided with written notice before the property is listed for sale. We usually deliver the notice in person so we can discuss the situation face-to-face.
This could be an opportunity to talk about access to the property, or to set up a time for the tenant to meet the real estate agent. If this crucial phase is handled well the tenant will cooperate far more readily with access, keeping the house tidy etc, to help present the property for sale.
Please advise us of your intention to sell as soon as possible; the more notice we give the tenants the better.
Landlords and their real estate agents have the right to show potential buyers, registered valuers or building experts through the property, however this cannot be done without getting the tenant’s permission.
Before including open homes or an on-site auction in the marketing campaign, the sales agent and property manager should discuss this with the tenant. They will need to get the tenant’s consent for specific dates and times for these events.
While tenants cannot refuse access on unreasonable grounds, they can set reasonable conditions for allowing people through their home. For example, they may limit access to certain times of the day or days of the week, ask to be present during open homes, or refuse open homes and auctions on-site and insist on appointment-only viewings.
Tenants may request a temporary rent reduction for the inconvenience of allowing open homes. The landlord does not have to grant this request. If handled well these types of arrangements can work very well and can engender cooperation from the tenant in excess of their legal obligations.
Any access schedule that has been agreed to with the tenant needs to be in writing and signed by all parties so that it’s clear and understood by all.
Marketing photographs of the property
As your representative, we must get permission from the tenants before entering the property and taking photographs. The tenants can refuse to allow the landlord (or their appointed real estate agent) to take and use - for marketing purposes - photographs of their personal belongings.
After the sale
When the property has been sold, the landlord must inform the tenant of the following:
The name of the new owner
Their contact details and an address for service
How the tenant is to pay the rent (e.g. the new bank account number)
The landlord should also provide the new owner with a copy of the tenancy agreement.
When the property is sold, the original landlord's interest in the bond will pass to the new landlord. This means that the original landlord can no longer claim any part of the bond, unless they do so prior to settlement date (or date of possession, if this is earlier).
Ending a tenancy if the property is sold
The new owner may choose to purchase the property with 'existing tenancies', in which case the tenancy will continue under the existing terms and conditions. Another option is to purchase the property with 'vacant possession' meaning the property has to be vacant by settlement date.
In the case of a periodic tenancy, the vendor/landlord must provide the tenant with a minimum of 45 days’ written notice to end the tenancy , this includes an allowance for postage and delivery of the notice . This notice period may well be extended to 90 days or more under changes to the Residential Tenancies Act being proposed by the Government.
If the term of the tenancy is fixed, neither landlord nor tenant can give notice to terminate the tenancy prior to the fixed term expiring, unless both parties agree to terminate sooner. The tenant doesn't have to agree to this, and may negotiate certain conditions.