Can vendor lease post exchange

[Erin Woods]

I am looking at a property which is currently being sold subject to existing tenancy but the tenant is on an expired lease.

The vendor will not agree to alter to vacant possession.

If I signed and exchanged with the existing contract, is it possible for a vendor to entertain into a new lease contract with a tenant after exchange and prior to settlement?

This would obviously bind me to a term I don't want and at a rental return I don't accept. Or is there legislation which prevents this?

 

[Terry_w]

I think they could still lease it.

Why not insert a special condition so they can't.

 

[Kate Ashmor]

Agreed: any contract of sale you sign could include a special condition that the vendor agrees not to enter into a new lease or licence with the existing tenant or any new tenant.

You could try to include a special condition that the vendor will serve notice on the tenant to vacate within 2 business days of the contracts being signed and exchanged. Your settlement date can then be after the tenant vacates.

However, if the vendor refuses, you would need to serve notice on the tenant once settlement occurs.

Good luck!

 

[Erin Woods]

You could try to include a special condition that the vendor will serve notice on the tenant to vacate within 2 business days of the contracts being signed and exchanged.

I hadn't thought of this. If the clause stated the notice period as 60 days and the settlement period is 42 days would the sale still be considered sale of a going concern? The property is a licensed boarding house but with R1 zoning.

 

[Terry_w]

You could try to include a special condition that the vendor will serve notice on the tenant to vacate within 2 business days of the contracts being signed and exchanged.

I hadn't thought of this. If the clause stated the notice period as 60 days and the settlement period is 42 days would the sale still be considered sale of a going concern? The property is a licensed boarding house but with R1 zoning.

probably not.

 

[John M]

You could try to include a special condition that the vendor will serve notice on the tenant to vacate within 2 business days of the contracts being signed and exchanged.

I hadn't thought of this. If the clause stated the notice period as 60 days and the settlement period is 42 days would the sale still be considered sale of a going concern? The property is a licensed boarding house but with R1 zoning.

I believe that the concept of introducing going concern was to encourage investors to buy. If you buy a leased investment (or partially leased, with the remainder marketed for lease) and intend on keeping it as an investment then it is a going concern. If the tenant is issued notice to vacate before settlement then I highly doubt the ATO would agree that it is a going concern.