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Thinking of selling a rental property? Your obligations as a landlord

By : 2018-09-25
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If you plan to sell a house that is tenanted, be aware that your tenancy agreement may affect the sale of your rental property and your legal obligations to your tenants. Here’s what you need to know.

Before you sell

The legalities

You must notify your tenants in writing that you plan to sell the property.

While you have a right to sell your property, tenants also have a right to the quiet enjoyment of their home without constant interruption from real estate agents and prospective buyers.

With this in mind, it is within a tenant’s rights to:

  • limit access to the property to certain days and hours,
  • refuse to have open homes and on-site auctions (i.e. by appointment only), and,
  • be present during open homes.

What if I want to sell it as an empty property?

If you have a periodic tenancy agreement, you can give 90 days written notice to end the tenancy before putting your property on the market.

You cannot do this with tenants on fixed-term agreements.

Best practice

Give your tenants plenty of warning that you plan to sell and keep the lines of communication open. Good communication will make it much easier to take photos, arrange open homes or appointment viewings and do the necessary preparations before putting your house on the market.

 Read more: Preparing a house for sale including the correct sale documentation 

 

After the sale

If the buyer wants to continue the tenancy

The new landlord must provide their contact details, and information on how the tenant is to pay their rent.

Note: when you sell, the tenant’s bond is passed onto the new owner of the property and cannot be claimed on after the settlement.

 

If the buyer does not want to continue the tenancy

If your buyers do not want to continue the tenancy, they can request that the property is vacant at the time of settlement as a condition of the sale. If you agree, you must give your tenant at least 42 days notice that their tenancy is ending and ensure the property is empty before handing over the keys.

If your tenant is on a fixed-term tenancy, you cannot evict them before, during or after the property sale—even if the new owner doesn’t want to continue the tenancy. The new owner must wait until the fixed-term is up to end the tenancy.

All notices must be delivered in writing.

 

Best practice

Keep your tenants in the loop through the whole sales process, and give your tenants as much notice as possible if you plan to end their periodic tenancy.

In some cases, tenants on a fixed-term tenancy may be willing to end their agreement early if you want to sell the property empty or if the new buyers wish it vacant when they take it on. However, in Hamilton, long-term tenants are attractive to investors—and can play a part in attracting them to the property.

“For many of our investors, it's nice to inherit a tenant—particularly a good tenant, and particularly if they're paying a market rent or very close to market rent,” explains Glenn Collins, agent at Lodge Real Estate.

“Saying that, if what it's been rented out for has fallen slightly behind where it should be in the marketplace, then sometimes they prefer to do a small amount of work to the property just to lift it, to get it to another level.”

“It's a mix of people; those wishing to inherit someone and those wishing to almost start again and put their own person/tenant in place.”

 

What can I do to encourage tenants to stay?

Communicate, communicate, communicate: Inform them early of your intention to sell and keep them abreast of any developments.

Respect their privacy: You may own the property (for now), but it is still your tenants’ home. Having an agent show up on their doorstep for an open home they knew nothing about probably won’t go down well.

Thank them: Thanking your tenants for their understanding and regularly checking in with them to ensure the sales agent remains respectful of their needs will go along way. Some landlords even send a small thank you gift as a sign of their appreciation.

 

New to selling a home? Download our free guide to help plan your next steps.

Download the Waikato Home Seller's Guide