Selling a Tenanted Property: What You Need to Know
Selling a rental property with tenants in place can be a complex process, requiring careful planning and consideration. While it may seem convenient to have rental income continuing throughout the sales process, tenants often feel uneasy about the uncertainty of their living situation. Understanding the legal requirements, tenant rights, and the best strategies for selling a tenanted property can make the process smoother for everyone involved.
Do Tenants Stay or Go When a Property is Listed?
One of the biggest concerns when selling a tenanted property is whether the tenant will stay or leave once the property is listed for sale. The reality is that tenants may react in different ways, depending on their circumstances:
- Some tenants will stay – If they are comfortable with inspections and keeping the property presentable, they may choose to remain in the property.
- Some tenants will leave – The uncertainty of a sale and potential change in ownership may prompt tenants to move on.
Under the Residential Tenancies Act, the sale of a rental property changes the terms of the lease agreement, meaning tenants can vacate at any time. This is an important factor to consider when deciding whether to sell with tenants in place or to wait until the lease expires.
Legal Notice Periods for Selling a Tenanted Property
If you decide to sell your property while it is tenanted, you must adhere to legal notice periods:
- 14 days' written notice must be given to tenants before the property can be marketed.
- No advertising or promotion of the property can take place before the notice period has been served.
· At least 14 days’ written notice before the first open house or inspection for prospective buyers.
· After the first inspection, you can conduct viewings up to twice per week with 48 hours’ notice for each.
Failing to provide the correct notice can cause complications, so working with an experienced property manager can ensure compliance with the law.
Managing Tenant Concerns
Selling a home can be stressful for tenants, as they may worry about having to move or dealing with frequent inspections. Common concerns include:
- Intrusive inspections – Tenants may dislike having strangers in their home for open houses or private viewings.
- Constant upkeep – Keeping the property tidy for inspections can be an inconvenience.
- Uncertainty – Tenants may feel anxious about whether they will need to relocate if a new owner decides to move in.
A respectful approach can go a long way in maintaining a good relationship with the tenant. Offering flexibility in inspection times and keeping communication open can help ease their concerns.
What Happens If the Buyer Wants to Move In?
If it is a fixed-term lease (still within the lease period), the buyer cannot move in until the lease ends, unless:
- The tenant agrees in writing to leave early (often with compensation), or
- There is a valid break clause in the lease and it’s used correctly.
- Selling the property does not override a fixed-term tenancy.
If it is a periodic (rolling) tenancy and all three of the following are true:
✅ The property is sold
✅ The contract of sale requires vacant possession
✅ The tenant is on a periodic lease
👉 The landlord (or new owner) may give the tenant 30 days’ written notice to vacate, and then move in.
Are Tenanted Properties Easier or Harder to Sell?
Whether selling with tenants in place is beneficial depends on several factors:
Advantages of Selling with Tenants
✓ Rental income continues – The property generates income throughout the sale process.
✓ Appeals to investors – A tenanted property may be attractive to investors looking for an immediate return.
✓ No vacancy period – The new owner won't have to find tenants immediately.
Disadvantages of Selling with Tenants
X Limited buyer pool – Owner-occupiers may be discouraged from purchasing if the property has tenants.
X Presentation challenges – Tenants may not maintain the property in perfect condition for inspections.
X Tenant cooperation is required – Some tenants may not be accommodating with inspections.
Making the Right Decision
The best approach depends on your target market. If your likely buyer is an investor, keeping the tenant in place may be a strong selling point. If your ideal buyer is an owner-occupier, it might be better to sell once the lease has ended.
Having an early conversation with your property manager and real estate agent will help determine the best strategy for maximising your sale price and achieving the best outcome.
Need Expert Advice?
If you are considering selling a tenanted property and need guidance, get in touch with us today. We can help navigate the complexities of the sales process while ensuring a positive outcome for both landlords and tenants.
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