How to sell with tenants in the house

Selling a tenanted property isn’t always a fast process. It can be made difficult if existing tenants get their backs up.

If your property is managed professionally by a company that is also a licenced real estate agency, then it’s best to use the same company, says Debbie Hills, team leader at Crockers Property Management.

Hills says where a second agency is brought in to sell the property, the agents may upset the tenants who can turn around and give a 21-day notice to vacate. That isn’t always in a landlord’s financial interest.

If the agency already has a relationship with the tenant, then they are often better placed to smooth over any discontent.

Hills says landlords who want to keep their tenants in place often reduce the rent over the marketing period in order to create goodwill.

A smaller percentage of landlords prefer to sell with the tenants out. This makes it easier to clean, decorate and stage the property as well as running open homes.

If you plan to sell, it’s essential to stick to the letter of the law with the Residential Tenancies Act (RTA). The Tenancy Tribunal frowns on breaches of the law. Make sure, says Hills, that you give relevant notice in writing to the tenants.

In the case of fixed term tenancies, landlords can’t simply give notice because they’re selling. They need to give notice timed to coincide with the end of the fixed term. Or if both tenant and landlord agree, the tenancy can be ended early. Landlords might negotiate compensation with the tenant to encourage them to agree.

A periodic tenancy can be ended with 90 days’ notice or, in limited circumstances, 42 days. Where the 42-day notice option might be relevant when selling a property is when:

■The property has been sold and the new buyer wants vacant possession. The notice is given when the sale goes unconditional.

■The owner or a member of the owner’s family is going to live in the property as a “principle place of residence” before being sold. This can’t be used simply to get the tenant out to put the property on the market if the owner/family do not move in.

Reasons must always be given in writing for a 42-day notice. Typically, says Hills, she advises clients to leave a total of 50 days after the notice is served before settlement. This leaves four days for postage as required by the RTA and another four days in which the vendor can fix any issues before the settlement inspection.

Scotney Williams of TotalTenancy, which provides advice to landlords and property managers, says landlords often abuse the 42-day notice, but it’s a mistake because it’s so easy for tenants to catch them.

It is not an unlawful act so compensation to tenants by the Tenancy Tribunal is limited to 48 days’ rent, being the difference to a 90 day notice, says Williams.

The Tenancy Tribunal hears many cases where tenants believe the reasons given in the notice are either a sham, or retaliatory.

There have been cases as well where 42 days’ notice of the “owner” moving in has been given for a property held in a trust.

“A trust cannot occupy the property and neither can a trust have members of a family,” an adjudicator commented in a hearing involving a trust that owned a rental property.

Sometimes tenanted properties are sold with a tenant in situ. If the vendor and purchaser agree, the tenancy agreement can remain in place, says Hills. The tenancy agreement must match the original.

Williams adds that in this situation the vendor and purchaser can amend the agreement for sale and purchase to say that the tenant doesn’t have to leave.

“The only fly in the ointment is the new landlord cannot immediately put up the rent, as most want to, because of section 60c of the RTA.”

He says the vendor landlord and purchaser landlord must complete a change of landlord /agent form and then file it with Tenancy Services so that the Bond Centre has specimen signatures and a record of the new landlord for bond pay-outs.

Open homes can be a bone of contention between tenants and landlords. For example, tenants have been known to refuse landlords entry after they advertised open homes for properties without asking permission.

Tenants sometimes complain that their quiet enjoyment or privacy has been breached by an open home.

In the future, investors may not have the 42-day option or even possibly the 90-day option. Two key points in Labour’s election policy were to abolish no-cause terminations of tenancies and the 42-day notice period. Any changes are expected to be considered as part of the Government’s review of the RTA following a public consultation.