Tenant in the Property or Vacant Possession?

How to know if there is a tenant in the property you are purchasing?

A Real Estate Institute of Queensland (REIQ) Contract provides a section for the seller to complete if there is a tenant that will live in the property past the settlement date. This section will include the name of the tenant, how long the tenant will be living in the property and the amount of rent they pay. If this section is filled out, then the property is sold subject to an existing tenancy. This means that at settlement the tenancy will be transferred to the buyer who has the obligation to uphold the agreement until the end date stated on the contract.

If the tenancy section is not filled out then the property is sold on the basis no tenant will live in the property past the settlement date. It is therefore a condition of the contract for the seller to provide vacant possession at settlement.

Ending a Tenancy

If a buyer is made aware of a tenant in the property, they must decide on the future of the tenancy – whether the buyer will keep the tenant on or whether the buyers will evict the tenant and move into the property. If a buyer is looking to end the tenancy they can do so by the following ways:

• for a fixed term agreement, the tenant can stay until the end date of their fixed term. The new owner will become the property owner and cannot make the tenant leave until after the end date of their agreement; or

• for a periodic agreement, a buyer must provide a tenant with a Residential Tenancies Authority Form 12 Notice to leave at least 4 weeks after the contract has been signed. Alternatively, the buyer must provide the tenant with 2 months from the date the notice is given to vacate the property.

Contract Tenancy Schedule is Incorrect

Unfortunately, there are situations where the tenancy schedule has been completed with the wrong information, which presents problems in situations where the tenancy details have not been completed but there is in fact a tenant in the property whose lease term ends after the settlement date.

If this occurs the requirement for the seller to provide vacant possession at settlement will still apply. Their failure to give vacant possession means the seller  has breached the contract and the buyer has the following options:

• they can terminate the contract;

• they can sue for damages;

• they can attempt to negotiate with the tenants to move out of the property; or

• they can uphold the tenancy agreement between the seller and the tenant.

Does having a tenant in the property prevent you from claiming a transfer duty concession?

There may be an instance where a buyer purchases a property with a tenant. However, when the tenancy expires the buyer intends to move into the property and live in it. This may raise questions with a buyer as to whether they can claim a home concession if a tenant will be living in the property for a period of time after the settlement date.

The Queensland Revenue Office allows for a buyer to claim a home concession so long as they will move into the property within 12 months of the settlement date. So yes, a buyer can still claim a home concession on the property they are purchasing even if there is going to be a tenant living in the property at settlement, so long as:

• the tenant moves out within 12 months of the settlement date;

• the buyer moves into the property within 12 months of the settlement date; and

• the buyer will live in the property for at least 12 months after moving in as their principal place of residence.

If you have any questions or require assistance with a conveyancing matter in Queensland in particular regarding a tenancy included in the contract or vacant possession then please contact the property team at NB Lawyers for more information.

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