Selling woes and vacant possession

T

tez

Hi all,

Im selling my unit off at the moment and have a prospective buyer interested in buying. The unit current has a tenant in there on a expired lease.

The buyer is asking for the contract to be changed from subject to existing tenancies to vacant possession. Im a bit reluctant to do this, as what happens if it comes time to settle and the tenants for whatever reason are still in the property.

My conveyancer has come back and said there are really only two options so I dont put myself up for being sued.

- leave the clause subject to existing tenancies
- have vacant possession included although with an additional clause time of the essence in that if we are unable to settle by a certain date, then either party can walk away with no recourse.

Buyers solicitor has come back and is happy with the time of essence clause although they want to remove the fact that I have the option of walking away.

The reason I want this included is that if there are any issues with vacating the premises then we both have a get out clause.

Any thoughts on this?
 
tez said:
Buyers solicitor has come back and is happy with the time of essence clause although they want to remove the fact that I have the option of walking away.
Click to expand...

Seems a bit one-sided. They want to be able to walk, but you cannot???

I'd offer the clauses you solicitor suggested and tell them to take it or leave it.
 
We have sought legal advise on this in the past. If the property is is NSW the Residential Tenancies Act 2010 Part 5 Division 2 Section 86 states

86 Sale of premises

(1) A landlord may give a termination notice on the ground that the landlord has entered into a contract for the sale of the residential premises under which the landlord is required to give vacant possession of the premises.
(2) The termination notice must specify a termination date that is not earlier than 30 days after the day on which the notice is given.
(3) The landlord must not give a termination notice under this section that specifies a termination date that is before the end of the fixed term if the residential tenancy agreement is a fixed term agreement.
(4) The Tribunal may, on application by a landlord, make a termination order if it is satisfied that:
(a) the landlord has entered into a contract for the sale of the residential premises that is proceeding under which the landlord is required to give vacant possession of the premises, and
(b) a termination notice was given in accordance with this section and the tenant has not vacated the premises as required by the notice.

Therefore if you leave the contract as subject to existing tenancies you would be required to give 90 days no grounds notice to the tenants. This being the case I would go with the additional clause and change to vacant possession otherwise the buyer will need to settle with the tenant still in which I am sure their solicitor will be against.

This is a fairly common problem.:(
 
Thanks for the input. I will only proceed with either of the clauses my conveyancer has put forward as it gives both parties equal power.

Priscilla, interesting, I'll have to follow up with the notice period when subject to existing tenancies is used.
 
Potential buyer doesnt like the clauses and wants it so they are control. No way.
So I just keep looking now :)
 
What's your grief with offering vp? If the tenant is on an expired lease, they have zip in the way of rights, other than being given the appropriate notice as noted above ie 30 days.

Do you self manage or use an agent? The agent will be able to advise as they do this day in/day out - if they want their commission for a sale, then they will serve notice if you want them to.

Granting vp only comes into play once they have signed the contract, ie request a S66W (waiver of cooling off period) so that there is no backing out, then you can give notice.

Why is the conveyancer trying to complicate things with a non-recourse clause? There is absolutely no benefit to you to have a lack of certainty about settlement as you have spent time and money in marketing the property only to have settlement fall over 6 weeks after you have turned other buyers away. Hasn't the conveyancer settled a property before?

If you don't settle on the day, it does not give the buyer the right to terminate the contract, however you may have to delay the settlement (they cannot serve notice to complete for another 14 days and you can seek possession orders from the tenancy tribunal if required).
 
Hi Scott, thanks for the insight. The only reason for the non recourse clause is a worse case scenario.

So say the property is due to settle, I get served a notice to complete within 14 days and the tenant is still in there. By the time it all goes through the Tribunal etc, Im guessing 14 days would have passed and then the buyer would be able to pull out, hitting me up for whatever legals etc they have paid?

That is the sole reason of the clause. To protect me in the worse case scenario.
 
It's one of those "cake and eat it" scenarios - you wan the rent form the tenant as long as possible (fair enough) but still want to sell.

The problem is, it is often times easier to sell if the property is vacant.

One solution is to contact the PM (if there is one) and explain the situation and could they look for another suitable property for your tenant, and give them the standard vacate notice while the PM searches.

If the house is priced accordingly, it should sell fairly quickly. I don't know what your local market is like, but ATM it is harder to sell for a decent price ina lot of areas.
 
It really is not that complicated.

> Change settlement period from 42 days to 56 days (to allow time for any delays in terminating the tenant)

> Exchange via solicitors/conveyancers with a S66W - no cooling off period

> Issue 30 days notice to tenant - ensure that notice is hand delivered to tenant so that 4 days postage period is not needed.

> Tenant should vacate 20+ days via to settlement

> if tenant fails- apply for urgent tribunal hearing - tenant will be out before settlement date
 
Look at it from your buyer's point of view:

a. what they are hearing you say is I don't think I can get the tenant out before settlement is due
b. and the seller is expecting me to pay legal costs, search fees etc and wanting to be able to walk away

if I were your buyer I would be walking away - you are making it too complicated for them
 
Fair point on what was been said above.
So best is to ask for a settlement period a bit longer that will give me a bit of time if the tenant is not out
 
> Exchange via solicitors/conveyancers with a S66W - no cooling off period
Click to expand...
Is this allowed in NSW? It isn't in Vic unless it's an auction, or you seek legal advice on the Contract.

> Issue 30 days notice to tenant - ensure that notice is hand delivered to tenant so that 4 days postage period is not needed.
Click to expand...
Is this allowed in NSW? In Vic it is 90 days.
 
BayView said:
Is this allowed in NSW? It isn't in Vic unless it's an auction, or you seek legal advice on the Contract.


Is this allowed in NSW? In Vic it is 90 days.
Click to expand...

You can exchange with a 66w in NSW. Some agents use it for homes that have passed in at Auction and are now being sold via private treaty or when they've had a deal on a house fall over once or twice before. If I was selling my house I would sell this way if I could.
 
I'm with the majority here ... I can't see the problem.

Tenant on expired lease so has no rights to stay. Buyer wants vacant possession.

Easy - sign contract with buyer, issue tenant with vacate notice. Most tenants start looking for a new place straight away and often move out before the 30 days are up.

Why do you think this tenant will buck the trend?
 
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