- Posted 23 Dec
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You’ve found the perfect house and you can’t wait to get in and start making those renovations you’ve been discussing with your spouse… only, you can’t just move in on settlement because the house you’ve fallen in love with is already tenanted.
What does this mean for you as the home buyer? While it can be tricky, you do have options and it’s important that you explore and understand what these are before you sign on the dotted line.
Understanding Tenanted Property Options
Find out what type of lease is in place for the current tenants. Is it periodic or month by month or is it a fixed-term lease where the tenants have signed to stay in the property for a specific amount of time?
If they have a fixed term lease, check the end date, as it could have passed and rolled over into a periodic tenancy agreement, which is a month by month basis.
Before you sign on the dotted line, read the vendor’s statement to find this information.
Periodic or Month by Month
If the lease is periodic, then the landlord has to provide the tenant with 60 days notice to vacate. This can be done while you’re in the settlement period or before the property is even sold.
If it’s a fixed lease, the landlord cannot break it, so you would have to weigh up whether you’d be willing to wait for the lease to expire.
If a fixed lease is in place, and you decided to purchase the property anyway, the current rental income would be transferred to you and you would receive the income after settlement.
You’d have the option to change property managers as well. No matter what you do, you will have to advise the tenants about any changes.
The Best Option
If the fixed lease still has a good 3-5 months left on it, there is another option. Once settlement has been processed and you’re the official new owners, there is a possibility (depend on the laws in your State) that you could come to a mutually beneficial agreement with the tenants direct.
You could offer to pay all of their moving fees and final rental payments for two months in exchange for them vacating the premises early.
There are a number of scenario’s you could put to them, it just depends on how much you want the house.
The only thing you cannot do is approach them BEFORE settlement has taken place. The current landlord could approach them on your behalf, but it’s best to wait until settlement has taken place.
So there is a risk that they may choose not to take you up on any such offers, so you’d need to keep this in mind.
Finding your dream home can seem challenging, but as long as you have the right home loan in place and you’ve done your own research, the right place is not far away.
If you need help securing pre-approved finance, contact the team at Australian Credit and Finance today.