Selling a Leased Property
Selling a house seems straightforward enough, but when you’ve got a tenant living in it, things can get a little tricky.
In fact, one common question we often get asked is : can a landlord sell a property during a lease?
While the idea might seem daunting initially, with the right knowledge, sound strategy and a proactive, yet considerate approach, it's not only possible but can turn out to be a smooth (and profitable) process.
Here’s how to make the process of selling a tenanted property easier, for both you and your tenant.
The Pros & Cons of Selling a Property That’s Leased
Before diving into how to sell a leased house, it pays to consider why you would do so.
Because like anything, selling with tenants living in your property has both benefits and challenges:
Some of the benefits might be :
- A steady income : you’ll keep receiving rent while the house is on the market
- Attracting other investors : Some buyers love that properties are already rented out, because it means instant returns
- The property looks homely : A house that's lived in often feels warmer to visitors than an empty space
- Flexibility : While there are certain rules and regulations that need to be followed, there is no need to wait until the lease ends to sell.
Some challenges are :
- Tricky open homes : Organising open inspections with a tenant can be a juggling act, and relies on cooperation from both parties
- Home presentation : If the tenant doesn’t keep the property tidy, buyers may be turned off
- Owner occupiers : Some buyers might be looking for a home to move straight into, not want to wait for the lease to end
- Paperwork : There are a few extra steps in the sale process to ensure you respect the tenant's rights
So now we’ve looked at why you might be considering selling your rented property, it’s time to look at how you might go about it.
Starting the Sales Journey Right: Transparency is Key
Imagine being a tenant and suddenly discovering that the property you call home is suddenly on the market. Quite unsettling, right?
To avoid this scenario and alleviate any undue stress, it’s not only respectful, but landlords are also obligated to ensure things transparent right from the start.
So before signing a lease agreement, it's vital to let your tenant (or any potential tenant) know if you plan to sell the property soon.
If you decide to sell, or enter into a sales tenancy agreement, either before or during a lease, your tenant must be updated about this decision, in writing, within 14 days.
This waiting period is mandatory. It ensures that the tenant is prepared before the property is advertised or shown to potential buyers.
And if you do find a buyer?
At least 14 days before the property is due to settle (or as soon as possible if settlement is shorter than 14 days), you’ll need to pass on the buyer’s details, as well as when, how and to whom, they’ll need to start paying their rent.
Understanding Your Obligations : Knowing When and How Leases Can End
It’s important to remember that both landlords and tenants have rights when it comes to the sale of a rented property.
And when leases are involved, it's essential to understand the rules around termination or cancellation.
Whether it’s the tenant’s or landlord’s decision to end a lease, here are a few things to keep in mind:
- Tenants
In some cases, a tenant may feel like the rug has been pulled out from under them when they find out about their home being sold.
If the house sells, and you’ve provided them with the required written notice, tenants can choose to leave within two months of getting that notice.
If, however, you haven’t advised them of your intention to sell, or if a contract of sale has been signed within 2 months of their lease beginning, the tenant can decide to terminate the lease whenever they like.
In either scenario, the tenant must provide a written 'Notice to terminate the tenancy’ (form 4A).
- Landlords
On the flip side, if you, as a landlord, need the tenant to move out, things can get a bit trickier.
If the tenant has signed a 'fixed term' lease, they have every right to occupy the property until the contractually agreed-upon date.
However, if your tenants are on a 'Periodic' lease, the rules change slightly.
If a buyer prefers the house be empty, a landlord can forward a notice to vacate due to sale of property, which gives the tenant 60 days to move out. If there’s no buyer, but you’d still like it vacated, you are required to provide a longer, 90-day notice period.
Respect & Communication : Making the Sales Process Smooth for Everyone
While all of this can sound a little prickly, it doesn’t need to be.
Selling a tenanted property isn't just about contracts and notices - it’s a process that involves human beings, and often emotions run high.
With this in mind, if the entire process, from start to finish, is handled with empathy and grace, and there’s good communication, it is possible to achieve a great outcome for all.
Given you’ll need your tenants on board to properly advertise and market the property, here’s how to strike a good balance around what needs to be done, and ensure everyone is happy:
- Open inspections : Viewing times can be a potential source of friction, but it need not be. The golden rule? Remembering that your tenant has a life too.
Technically, the property can be shown to buyers twice a week. But if the tenant is okay with it, you may be able to negotiate more. Of course, making sure you agree on set times that work for everyone is the best approach.
- Signage : You might want to place a 'For Sale' sign in the yard, which is usually okay. However, if the tenant feels it's a problem, or overly intrusive, it's best to talk it out and come to a mutually agreed solution.
Maybe it’s placing the sign in a less obtrusive location where it's visible but less dominant, or possibly agreeing on a shorter period for the sign to be up, focusing on peak selling times or weekends only. Whatever the solution, trying to find a win-win solution will ensure things run smoothly.
- Photography & Videography : Visuals play an important part in the marketing process, but given your photographer or videographer will need to enter the home - with all your tenant’s possessions inside - it requires a delicate balance of respect and advance preparation.
The best way? Inform the tenant well in advance so they’ve got time to prepare the house, and pick a photo session time that works for them. Offering them several options is a good way to approach it. Assure them of their privacy, and as a kind gesture, consider offering a small rent discount or gift for their cooperation. And always remember to thank them for their understanding and flexibility.
Strong Partnerships : Choose a Real Estate Agent Who Cares
The journey of selling a rented house can be an emotional rollercoaster for tenants.
After all, your property is their home. They've built memories in that space, and have likely settled into a comfortable routine.
So, when choosing a real estate agent, it's best to find someone who understands this and acts accordingly.
An agent who’s both experienced and empathetic can help manage everything smoothly, making sure both the landlord and tenant are happy, and that the process is handled with much-needed compassion and care.
Selling a rental property with tenants on a lease might seem challenging on the surface.
But with the right knowledge, open communication and a touch of empathy, it can be a win-win for all parties involved.
And if you’re a landlord about to start this journey? You don’t have to go it alone.
Reach out to a knowledgeable real estate agency like We Connect Property.
Our local team are experts at selling tenanted properties.
As both Property Managers and Selling Agents, we can seamlessly manage the entire process from start to finish - offering a truly personal and human touch along the way.
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As property management experts with over 21+ years combined experience in buying, selling and managing property in Adelaide, We Connect Property are ready and waiting to offer expert guidance and support when you need it most, and answer all your questions about property investing.
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And if you’re just getting started, or looking for valuable property investment, buying or selling tips, tricks and advice?
Check out these other handy articles on our blog:
Give us a call on 0403 799 983 today, or drop a line to sales@weconnectproperty.com.au - we can’t wait to chat!
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DISCLAIMER: All recommendations made by We Connect Property are general in nature and not to be relied upon as legal or financial advice. To ensure accuracy, we always strongly recommend seeking independent, professional advice tailored to your specific situation before making any investment or financial decisions.