Who is responsible for vacating tenants on a sold property?

Bob asks:
(updated on Tuesday, May 29th 2007)

We buy a house which is tenanted to live in ourselves - does the rule of 42 days still apply - the tenant and old landlord have no agreement other than verbal - tenant moved in on the understanding that the house was for sale. Can we move the tenant out on our takeover date? If not who is responsible for the lease and who gets the rent.

Our Experts Answer:

You will need to check the agreement for sale and purchase to see what it says about whether the sale is with vacant possession or with the tenant remaining in occupation. If it is with vacant possession, then the current owner should give the tenant 42 days written notice from the date that the sale goes unconditional.

Whilst tenancy agreements should be in writing, verbal agreements are just as enforceable and are still subject to the Residential Tenancies Act 1986 (the Act). If the property hasn’t been sold with vacant possession (or there is insufficient time for the old owner to give the tenant the required notice) then:

• Under section 43 of the Act the old landlord must advise the tenant (in writing) that the property has been sold and provide the tenant with the name and contact address of the new owner (as far as they are known to the old owner).

• The tenant is not required to pay rent to the new owner until the above notice is received.

• If a bond has been paid, it should have been lodged with the Department of Building and Housing. The old landlord can claim against the bond up until the earlier of settlement or possession date. After this date, the old landlord’s interest in the bond passes to the new owner. Both landlords should complete a Change of Landlord Form to transfer the bond into the new owner’s name.

• There’s usually no need to enter into a new tenancy agreement when a property is sold, as the new owner can’t unilaterally change the terms of the existing agreement (for example, the new landlord can’t request a bond if that wasn’t part of the agreement with the previous owner). However, under section 15 of the Act, the new owner must provide the tenant with their full name, contact address and address for service. If, when you take possession the tenant is still in occupation, you can give a 42 day notice for the tenant to vacate as long as you, or a member of your family, intend to take up residence in the property. The tenant would have to pay rent to you until they vacate the property.

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 on setting up a tenancy agreement and on the obligations of landlords and tenants call our free phone number 0800 TENANCY (0800 83 62 62) or visit www.dbh.govt.nz.

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.


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