What happens when you buy a house with tenants?

When you buy a residential property subject to an existing tenancy, there are a number of considerations:

1. Term of Existing Lease Agreement

• Fixed-term Lease: Is where the agreement is for a period of time and has a specific end date (e.g for 6 or 12 months). Unless otherwise permitted by the Residential Tenancies Act 2010 (such as for breach of the agreement and/or failure to pay) you cannot require tenants to vacate before the end of the fixed term.
• Periodic Lease: Is where a fixed-term has not been specified in an agreement or where the fixed-term of an agreement has expired. A periodic lease may be brought to an end without grounds, subject to providing notice as required by Residential Tenancies Act 2010 (typically a 90-day notice period).

2. Transfer of Bond

The tenant's bond is held by the NSW Rental Bond Board. Upon your purchase, you'll need to complete a "Change of Managing Agent/Owner" form to transfer the bond records to your name.

3. Inspection and Condition

Before purchasing, you should inspect the property and review the tenant’s ingoing condition report to ensure there are no surprises. You might also want to review the tenant's payment history and enquire as to any existing breaches of the rental agreement.

4. Rental Income

As the new owner, you will receive the rental income from the property. Ensure that arrangements for rent payments are updated with the tenants and/or managing agent and that the rent is correctly adjusted in accordance with the contract.

5. Property Management

If the property was managed by a real estate agent, you might consider continuing with the same agent or switching to a new one. If you choose to self-manage, you’ll need to familiarise yourself with NSW tenancy laws.

6. Insurance

It’s strongly recommended that you have landlord insurance that covers tenant-related risks such as malicious damage to the property and/or loss of rental income.

It's advisable to seek legal advice and/or consult with a real estate professional to ensure you understand your obligations and rights when buying a property with tenants in NSW. Do you need property advice? Reach out to our experienced and friendly property lawyers.

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