Advice on selling rental properties with tenants
Question from Leanne updated on 8th November 2006:
Our expert Jeff Montgomery responded:
We encourage landlords selling their tenanted properties to be open with their tenants about their plans from the outset, to avoid any misunderstanding or disputes. For information and advice about your rights and obligations under the Residential Tenancies Act call 0800 TENANCY (0800 83 62 62) or visit www.dbh.govt.nz.
If you wish to place the rented property on the market for sale, you must advise the tenant in writing. To show the property to prospective tenants, purchasers or a registered valuer who is engaged in the preparation of a report, you will need the prior consent of the tenants to enter the property. The tenants cannot unreasonably refuse consent but may attach reasonable conditions to their consent. The best approach is to talk this through with your tenant to agree an approach the works for both of you.
Tenants may not have to agree to open homes or auctions on site and can insist the property be shown by appointment only. If a landlord wants to include open homes or an on site auction in their sales plan, they should discuss this with the tenant first and get their tenant’s prior consent for specific dates and times for these to occur. As your tenancies are periodic, they can be terminated by notice in the event that you agree to sell your properties with vacant possession. Of course, prospective purchasers may wish to keep the properties tenanted and retain the current tenants.
Selling with vacant possession: If you agree to sell your properties with vacant possession, you should inform your tenants of this as soon as possible. Your tenants have the right to give 21 days notice in writing to terminate the tenancy at any time. Usually, as a landlord you must give your tenants 90 days notice in writing to terminate a periodic tenancy. However, where a landlord has agreed to sell their tenanted property with vacant possession, there is a reduced notice period of 42 days.
Purchasers want to keep the properties tenanted: The purchasers may wish to keep the properties tenanted, and the current tenants may want to stay on in the properties after they are sold. As stated above, your tenants may give 21 days notice to terminate their tenancy at any time. When your interest in a property passes to the purchaser, the following legal obligations apply.
• The landlord must give the tenant(s) written notice of the sale, including the name and contact details of the purchaser.
• Until that notice is received by the tenant, the tenant will not be obliged to pay any rent to the purchaser and will not be liable to the purchaser for any rent owing to the previous landlord. • Once the tenant receives the notice, or on the date specified in the notice (if applicable), the tenant must start paying rent to the purchaser.
• The landlord’s interest in any bond paid by the tenants and held by the Department of Building and Housing in relation to the tenancy will pass to the purchaser on the date of settlement or the date of possession (whichever is the earlier). The landlord and purchaser should complete a change of landlord/agent form (go to www.dbh.govt.nz/tenancy to download the form) and forward it to the Department of Building and Housing to update the bond record.
The Department of Building and Housing provides information and guidance on building law and compliance, services including weathertight homes, and advice for tenants and landlords.