The Challenges of Selling a Tenanted Property

The Challenges of Selling a Tenanted Property

What to do When You Want to Sell Your Property but Have a Tenant

It's no secret that the housing market is tough right now. If you're trying to sell your house, you know just how competitive it can be. And if you're trying to sell a tenanted property, things can get even more complicated.

You'll need to take into account the needs of both the tenant and the buyer, and work out a plan that will make everyone happy. You'll also need to be prepared for any potential problems that may arise during the sale process. With careful planning and the right agent - selling a tenanted property can be a smooth and successful process.

But before you get started, there are a few things you should keep in mind.

Can you sell a property with tenants in NZ?

Yes! It is fine and possible to sell a tenanted property but you’ll need to give your tenant correct written notice of your intention to sell, and ensure they still have 'quiet enjoyment' of the property throughout the process, whether you’re selling for vacant possession or tenanted.

In some cases you cannot start marketing the property until the tenancy has ended, however you can make preparations for the sale while the property is still tenanted such as having an appraisal, photos or video taken (with tenant permission).

Step 1: Know what you're working with.

You'll need to check your tenancy agreement to see what the tenants agreement is. They will be on a fixed term tenancy or a periodic tenancy.

Step 2: Decide on what will happen to the tenancy when the property is sold

There are 2 main scenarios when it comes to selling leased properties.

The landlord sells the property to an investor who is keen to take over the tenancies as the new landlord. The details of the lease in the agreement must be re-examined along with details of the bonds held on the tenancy services. Contact is needed between landlord and renter. Conditions of the tenancy will not affect the circumstances of this property.

OR

The landlord sells it to another purchaser who intends to live in or use the property themselves and therefore wants vacant possession. Correct notice will have to be given and observed by all parties being landlord, purchaser and tenants.

What about access to the property during the sale process?

Tenants remain permitted to the 'quiet enjoyment' (see residential tenancies act) of their property throughout the sale process but they cannot unreasonably refuse access.
This means real estate agents should be group viewings together where possible into a time that suits with the tenant's permission.

For photos in a rented property, tenants can request that you don't take photos of personal items.

What notice and notifications do we need to send?

*note, The Residential Tenancies Act is constantly changing. While this is correct at time of writing it will not be updated. Always refer to www.tenancy.govt.nz for the latest information.

FROM TENANTS: A fixed term tenancy ends if a tenant gives notice 28 days or more before the expiry date of the fixed term. If the tenant does not give notice to end the tenancy at the expiry of the fixed term, the tenancy becomes a periodic tenancy. A periodic tenancy can be ended by the tenants with 28 days written notice.

FROM LANDLORDS: If a landlord wants to end a fixed tenancy or stop it from rolling onto a periodic tenancy, they need to give a reason for ending the tenancy(only specific reasons are acceptable) and provide the correct amount of notice based on whichever reason applies. The same reasons are used for ending periodic tenancies.

How much notice do you need to give a tenant when selling a house?

In most cases as the landlord you are required to give your tenants 90 days written notice to end a tenancy, you can only end it for government approved reasons, and this cannot be inside of a fixed term tenancy. Fixed term tenancies do not end for any reason unless on rare occasions where all parties agree.

Breaking a fixed term tenancy

Breaking a fixed term tenancy is not something that can be done easily. It requires agreement on both sides and often sweeteners thrown in if the landlord is the one wanting to end a fixed term early. A landlord might offer another rental property from their portfolio, they might forgo some rent or even pay the tenants some rent for their next property,

Our advice -

Working largely with apartments we sell a lot of tenanted properties. We are experienced at negotiating not just with buyers, but with tenants too!

We often take a small gift to the tenant which can help us gain better access. An auction is the preferred sale method for tenanted properties as it provides a short, sharp marketing period with fewer open homes during which we hope to secure buyers and a sale. This means the tenant has less disturbance and the vendor has a faster sale.

The key is to make sure that the tenant is aware of the sale and is willing to cooperate. Timely communication always helps. You'll also need to work out a plan for transferring the tenancy agreement to the new owner once sold including what to do with rental income and providing tenants the new bank account number.

Another thing to keep in mind is that the sale of a tenanted property can take longer than usual. This is because potential buyers wanting to live in the property themselves may be put off by the fact that there is a tenant in place and notice periods to wait out. You'll need to be patient and make sure that you find the right buyer who is willing to take on the tenancy agreement or wait for notices to run.

At City Sales we successfully market and sell leasehold, hotel and remedial properties requiring specialist skills, as well as standard freehold units. We are practiced at dealing with delicate tenant situations, body corporates and working with clients based offshore.

We would love to help you action your property sale today. Give us a call on 09 30 30 601 or sales@citysales.co.nz