Selling any property can be a stressful and frustrating process. That’s even more the case, however, if the property has tenants since they can make the process much more complicated.
Tenants are a necessary element for most investment properties since they generate the rental income that makes the investment worthwhile. Nevertheless, they can make the property more difficult to sell but are usually an asset if you treat them correctly.
Dealing with Tenants
Many tenants will be on a fixed-term lease and you cannot force them to leave until that lease has expired. For those not on a fixed-term lease, you will be required to provide written notice if you want them to move out. The period of this notice varies between states, with sixty days written notice required in Victoria, while fourteen days notice is typically needed when a fixed-term lease has ended. Conversely, in some states, a tenant has the right to leave if you have not notified them at the time of signing the lease of your intention to sell before the lease period ends.
Having tenants in a property can be attractive to potential buyers, demonstrates that the property is a good investment and provides income while the sale process is ongoing. However, the presence of tenants can also be detrimental and add complications:
- Some buyers may have a specific purpose for the property and tenants may prevent this and so lose the sale.
- Tenants have to be informed of your intention to sell the property and when an agreement is reached. The notification period varies between states and a failure to adhere to the rules can give tenants the right to break their lease.
- Bad tenants can lower the value of the property by failing to maintain it in a reasonable state so it is not presented as well as it could be.
- Tenants have to be given a reasonable period of notice of inspections, typically two weeks before the first inspection and then 24-48 hours for subsequent ones. When there’s no agreement from tenants, inspections may be limited to two per week.
- Tenants’ permission may be needed to erect a sale sign although this is not necessary for common areas of a shared property.
The Importance of Tenants
Good tenants can help a sale by keeping the property in good order, vacating during inspections and generally boosting the perceived value of the property. It’s important, therefore, that you keep them on your side by ensuring they’re always kept fully informed and are given adequate notice of events. Since there will inevitably be some disruption during the sale process, particularly for inspections, you may offer them a temporary rent reduction to compensate for their inconvenience.
An experienced and professional estate agent can advise on your responsibilities and ensure you comply with tenant regulations, which vary by state and territory. With any of those we have available on our comparison tool, you can ensure your tenants are an asset rather than a burden.