Dealing With Tenants When Selling Your Investment Property
By Craig Lowe
When you decide it’s time to sell your tenanted investment property there are a few simple things you can do first to ensure the process is a smooth one.
First check the lease. If the tenant is on a periodic tenancy you can choose to give the tenant three months (ninety days) notice without giving a reason, or if the new owner wants vacant possession you can give the tenant six weeks notice once the sale goes unconditional. Make sure all correspondence is in writing and that you keep a copy. If it is a fixed term lease then the tenant has the right to complete the full term of the tenancy, however if the new owner wants vacant possession then you or the new owner can sometimes strike a deal with the tenant. One option is to agree on a reasonable date to vacate the flat and to not charge them rent during this period. Make sure any deal like this is in writing and signed by the tenant.
If for any reason you don’t keep a copy of the key to the property then do your best to obtain one before listing the property with a real estate salesperson. This is especially important if your tenant is upset about the sale as they may try to withhold access. If you use a property manager they will keep a key.
Talk to your real estate salesperson. Make sure they have an appropriate understanding of, and respect for, the tenants rights. There will also be other real estate salespeople bringing buyers through the property and while your real estate salesperson will not have direct control over this process they should be able to explain to you the company’s policy on viewings in tenanted houses.
The real estate salesperson and you should discuss possible compensation for the tenants as an incentive for them to be co-operative with viewing times and to keep the house clean and tidy for open homes. One way to do this is offer them a small percentage of the sale price (say 0.1%). For example if the property sells for $400,000 they will receive $400. This gives them motivation to facilitate the sale process as they will want the property to sell for a high price. The other option is to offer reduced rent while the house is on sale. It may also be worth gently reminding the tenant that it is in their interest to keep the property tidy as it is potentially their new landlord who will be viewing the property.
Make sure every communication with the tenant is done in writing and that you or your real estate salesperson keep a copy of every piece of correspondence. By law you need to give a tenant 48 hours written notice to enter the property, or less if they agree, but try and get this in writing otherwise it will be your word against theirs if they decide later to dispute it at the tenancy tribunal.
It’s important to keep the tenant happy during the entire sales process as they have the power to make the process a smooth one or a difficult one. It is vital to choose a real estate agent who understands this and who will work with the tenant to achieve a result that’s favourable for all parties.
For any more advice regarding this process please call me anytime on 021 764 647.