Settlement question

[Jayro]

Just after some thoughts here. We are in the process of purchasing another IP (only our 2nd IP). The property is currently tenanted but the lease agreement has expired and the tenant is just on a week by week lease. Now on the advice of the managing agent we have a clause in the contract stating that the sale is conditional on vacant possession at time of settlement. The current owners are continually trying to get every last dollar before the sale and now things have been stuffed up. They served him the notice to vacate too late and he is to be out by th 20th March yet settlement is booked in for the 14th March.

Now the current PM has made it clear that we wanted him out as he continually falls behind in rent. She also said he may not go too easily, she's not sure though, (obviously). So I assume now settlement will need to be made for say the 21st March and we hope he does get out. My question is, what if he doesnt and he drags this on?

The reason this is an issue for us mainly is the fact that we need to settle within 60 days of signing the loan docs to get the rate that we agreed on a couple of months back now. If we go over the 60 days due to no fault of the lender then they will adjust the interest rate to that at time of settlement which is a few rate rises above what we currently are looking at if we do settle in the 60days.

So obviously we hope he does just move on nicely but if not then do we look at maybe settling anyway and up the rent considerably whilst trying to evict him? Or do we not settle until he is out even if it does mean we get stuck with a higher rate (5 yrs fixed)? Or is pulling out of the sale and getting the deposit back an option (worst case) as they have not met the terms of the contract?

I think that all reads clearly enough. Just after others views.

Jayro

 

[PropertyFi]

Hi Jayro
I don't know what your advisors are telling you about how the tenancy laws work in this situation. Forgetting about that can you think about what's in the tenant's mind? And have you worked out how much it will cost you if he doesn't move on time? If you can solve the tenant's problem (whatever that is e.g. nowhere else to move to, doesn't have the $ for moving costs..?) then it might be worth your while to offer him a cash incentive to get out. Remind him that you are prepared to do this the hard way (eg through the tribunal), which will mean he will still have to move out fairly soon and he'll get nothing, or his smarter option is to take your cash incentive and move out before settlement. I hope this helps.

 

[BV]

I am suspecting that the tenant will delay his departure for as long as he can.
Where is the IP?
If the rental market in the area is tight it might not be easy to find alternative accommodation.
And for this particular tenant it could be even harder because of his history of late payments.
Good luck

 

[eKwatee]

Just after some thoughts here. We are in the process of purchasing another IP (only our 2nd IP). The property is currently tenanted but the lease agreement has expired and the tenant is just on a week by week lease. Now on the advice of the managing agent we have a clause in the contract stating that the sale is conditional on vacant possession at time of settlement. The current owners are continually trying to get every last dollar before the sale and now things have been stuffed up. They served him the notice to vacate too late and he is to be out by th 20th March yet settlement is booked in for the 14th March.

Now the current PM has made it clear that we wanted him out as he continually falls behind in rent. She also said he may not go too easily, she's not sure though, (obviously). So I assume now settlement will need to be made for say the 21st March and we hope he does get out. My question is, what if he doesn't and he drags this on?

The reason this is an issue for us mainly is the fact that we need to settle within 60 days of signing the loan docs to get the rate that we agreed on a couple of months back now. If we go over the 60 days due to no fault of the lender then they will adjust the interest rate to that at time of settlement which is a few rate rises above what we currently are looking at if we do settle in the 60days.

So obviously we hope he does just move on nicely but if not then do we look at maybe settling anyway and up the rent considerably whilst trying to evict him? Or do we not settle until he is out even if it does mean we get stuck with a higher rate (5 yrs fixed)? Or is pulling out of the sale and getting the deposit back an option (worst case) as they have not met the terms of the contract?

I think that all reads clearly enough. Just after others views.

Jayro

If the contract stated that you were entitled to vacant possession you should be given vacant possession. If they don't give you vacant possession I believe you can issue them a notice of breach of the contract and under SA REI law you can issue them with a notice giving them 3 days to comply. If they fail to comply you are entitled to impose penalties of 2% above the Adelaide bank variable rate devided by 365 days until they comply with the terms of the contract, this being deducted from the balance payable on settlement. I would suggest you do not agree to any extension or adjustment of settlement and contact your conveyancer to issue the necessary notices.

 

[Peter_Tersteeg]

You should be able to get vacant possession as previously mentioned, but given you've got a rate lock which shall expire, is it a great disaster if you do settle with the tenant in place?

Given the rate you probably got a month or two ago, I'd say it would be worth settling even if the tenant doesn't move out. At that point you can pursue your own avenues to remove the tenant if required.

You could also consider approaching the tenant and giving them an incentive to move. I've bought property where I wanted the tenants out. I gave them a cash incentive to move out which worked out very well. It's was just about understanding what they wanted and finding a common ground.

 

[BayView]

I like PropertyFi's solution about the cash incentive.

The PM should be able to locate another rental for the tenant, and you cold offer to pay the moving costs for them, and/or offer a one free week rent discount.

Also look at getting the existing owner to go halves with you on the costs so that everyone wins, or drop the amount required to pay out the tenant off the purchase price.

 

[Jayro]

Thanks you for those replies. The house is in Tasmania. In a suburb called Burnie.

My solicitor is apparently getting back to me early in the week. Would be nice since settlement is ment to be this coming friday. The selling agent had (of Friday) asked for an extention to the settlement date however we knocked back that idea. I just have a feeling if I do extent the settlement date then it will just continue week after week. I would rather look at options that you have raised and stick with the original settlement date.

Doesnt help when I seem to be continually chasing my legal advice as they are not too quick in getting back to us.

1st thing we are doing is confirming exactly when our 60 days expires as we really want to settle by that date. I think even if it means settleing with the current tenant in place (worst case) and then worry about getting rid of him. Our current locked in rate is nothing too flash but better than what the offer is now. Currently we are looking at a rate of 8.2% and thats what all our figures were calculated on and thats what we are comfy with so I will be working to stick with that rate.

A little stressed over it as is the wife. Nothing major I know but just a little nigle in the back of our minds I guess. She asked if i could put the post up just to get the views of the others on here so thanks again for the replies. Much appreciated. Will let you know how things progress.

Jayro

 

[lizzie]

i agree - check to see when you rate expires, and then (if the tenant isn't out) delay settlement until just before this date. the process to evict should already be in place, so you may have to finish this process, but it will be shortened - and does that mean you would then get the bond for any rent not paid after your settlement date?

 

[Jayro]

Update-

Our solicitor called us today and said that the owners will not be able to meet the contract requirments to settle on the 14th. They are now saying that he has been issued with a notice to vacate and that he must be out on the 20th. They say the delay was due to the PM not being able to get him at home to serve him as she said they need to (by law) serve him in person the notice to vacate. May be true im not sure

I was only able to speak with the legal recep person today but she believes in Tas they can serve a notice to comply which gives them 14 days to do so but she wasnt certain and is getting the solicitor to call me. She was asking me to not have it served until the 20th if he is still not out then serve but I didnt agree with that as I feel that is just wasting 6 days. I figure if they can serve it on the 14th then they should. Otherwise come the 20th and he wont go and then we serve it giving 14 days which including the 6 already wasted gives them 20 odd days. So that looks the path we are going. Big pain in the bum as the 20th is just before the 4 days off for easter break. I was hoping to settle this friday and get someone in by the long weekend. I assume its a long weekend in all states???

Anyhow, see what happens I guess.

Jayro