Selling a rental property can come with an array of challenges from both practical and legal standpoints. This is especially true if you have a long, fixed-term tenancy agreement with your tenants.
Should tenants vacate the property, or should the house be sold with tenancy in place? However you look at it, everyone involved – the buyer, you (the seller), and the tenants – should be aware of their responsibilities and rights.
Here are important steps, tips, and advice you must keep in mind to make selling a house with tenants easy and hassle-free.
This is the first question that comes to mind as a landlord. And the answer is a resounding yes – you are free to sell a house, condo, apartment or cottage with tenants still in it.
In most parts of New Zealand, the law gives tenants the right to still live in the house for the term of the tenancy. They can continue living there even after the sale if the tenancy term has not elapsed.
In a lot of cases, the potential buyers don’t mind having the tenants occupying the property during and after the sale has been closed. Of course, there are both benefits and downsides of selling a house occupied by tenants.
(1) Let the tenants know that you are selling the house
The first thing you should do is inform the tenants of your intention to sell the property. There are no ifs, buts, or ands here because the law clearly gives tenants this right. You may decide to let the tenants know well beforehand you decide to be selling rental property.
Remember no one wants to receive strangers in their homes suddenly. Because the notification should be done in writing, it might be best to deliver the letter yourself so you can talk about stuff like access to the house, and know when the best time for taking photos and holding open houses is.
(2) Get tenant’s express permission to access the house
As a landlord, the law requires that you get express, written permission from the tenants before you access the house to take photos or hold showings. More often than not, the tenant won’t permit their belongings to be photographed.
Be ready to meet certain conditions given by tenants before they allow access to the house. Some may limit your access to specific times and days. In some cases, the tenant may want to be there during showings and open house events.
Worst case scenario, the tenant may refuse auctions and open houses at the property, preferring the house to be opened to potential buyers by appointments only.
In either case, communicating and negotiating with the tenants will go a long way. In fact, some tenants may accept reduced rent in exchange for more freedom of access for you and potential buyers.
(3) Check if the tenants can willingly agree to vacate the house when you selling rental property
Having tenants in place is in and of itself a good selling point since it shows that the property is liveable and attractive. However, this can become a big hurdle to things like open houses and staging the property. This can become especially problematic if the tenants are disorganized, grumpy or otherwise careless.
The good news is that most tenants are willing to move out. You can sweeten the deal by reducing rent for the last month. You can talk to them to move to another property you own on the same or better tenancy agreement.
(4) Ensure the tenants are current on rent when Selling a House with Tenants
It’s only natural for some considerate landlords to let tenants fall behind in rent. If the tenants have a fixed-term tenancy, and they are behind on the rent, it may be time to bring their account to date.
Buyers will be checking how tenants are remitting rent. If you have delinquent tenants, then that won’t look good when it comes to selling a house with tenants who will continue living after the sale.
A great option might be to negotiate for the delinquent tenant to move out in exchange for forfeiting the defaulting rent. As a last resort, you might consider eviction or court order if the tenant can’t catch up on rent before the buyers roll in.
(5) Ensure the house is in great condition
When your house is on the market, make sure it’s in tip-top shape. For the duration of the sale, consider bringing in a yard or cleaning service to stay on top of the cleanliness, organization and kerb appeal.
You may want to apply a new coat of paint on the fence, front porch, fascia board, and some rooms that look tired. Some touch-ups and re-finishes may also help make the house show-worthy.
(6) Understand the rights of the tenants before, during and after the sale
Usually, when a rental house is put on the market, the tenancy continues. You will just hand it over to the new landlord.
However, some house buyers may not want tenants, which means the property will be sold as “vacant possession.” In other words, the house should be vacant by the close of the sale.
Often when a rented property is sold, the tenancy continues. The new owner simply becomes the new landlord. But sometimes the buyer doesn’t want tenants. And it all comes to the terms of the tenancy.
If you have a periodic tenancy, then you must give your tenants a written notice of a minimum of 42 days to terminate the periodic tenancy. This way, the house will be vacant for the sale.
If it’s a fixed-term tenancy, you might have to sell the house with tenants in it, alongside the tenancy.
Consult The WeBuyProperty.co.nz team if you are considering selling rental property with tenant in place.
