While property has the capacity to generate an income for the investor, there may come a time when you, the investor, wish to cash the investment in and move on. What happens then, if the property you wish to sell is currently tenanted? More specifically, what are your legal obligations to the tenant in these circumstances?
Section 71A of the Residential Tenancies Act 1995 (SA) requires that the owner of the property advise the tenants by way of a written notice that they intend to sell the investment property. Furthermore, they must advise of this intention no later than 14 days after entering into a sales agreement. It follows then, that the property would not be able to be advertised for sale until after this period had lapsed.
In relation to terminating the tenancy, if the event that the lease is for a fixed term, the owner must wait out the fixed term period as specified in the lease agreement. Even though the lease has an end date, the property owner must still give the tenant at least 28 days written notice prior to that date. If notice is not given the agreement will continue as a periodic tenancy
If the lease is periodic, the general expectation is that the owners give the tenants 90 days written notice to end the periodic agreement, unless it falls under one of the following exceptions.
• The property is to be lived in by the owner;
• The owner has planned to undertake major renovations;
• Demolition of the property is planned; or
• The property has been sold and the contract stipulates that it must be vacant at settlement.
In the case that an exception to the general rule can be identified, then the property owners may give the tenants 60 days written notice to end the periodic lease. Therefore, once the property owner signs the contract for sale they may issue a written notice for 60 days.
The appropriate form of written notice is the Form 3 Notice of Termination which is provided by the Australian Business and Consumer Services.
In any event, the property owner should ensure that all requirements of the written notice as set out under Section 91 of the Residential Tenancies Act 1995 (SA) are adhered to. For example, it must be in writing, be signed and state the name of the premises subject to the tenancy.
Confused? Uncertain as to what your legal responsibilities are? It is prudent to seek advice from a solicitor in the event you wish to sell an investment property occupied by tenants. A solicitor is best equipped to provide you with appropriate advice offering you the peace and mind that you are meeting your legal obligations. For advice on property law or tenancy agreements please contact Maddalena Romano or the team at Welden & Coluccio Lawyers.