In this week’s episode of the Talking Tenancies podcast, we discuss what is required from all parties when a rental property is for sale with Matt Sturgess from Customer Experience at the RTA.
Rental law changes around ending tenancies, renting with pets and the introduction of repair orders commenced on 1 October 2022.
Host - Belinda Heit – Communication and Education – RTA
Guest – Matt Sturgess – Customer Experience – RTA
Host: Welcome to the Talking Tenancies podcast, brought to you by the Residential Tenancies Authority. I’m your host, Belinda Heit. Join me as we explore everything you need to know about renting in Queensland, with experts from the RTA and industry. We're here to help make renting work for everyone.
When a rental property is for sale while it is occupied by a tenant, there are several scenarios that can take place, so it's important to be informed on the rights and responsibilities as a tenant and a property owner/manager. Today's expert from the RTA is Matt Sturgess from Customer Experience. Welcome Matt.
Guest: Thank you for having me.
Host: You're most welcome. Now, can you tell us about your role at the RTA and what you're responsible for?
Guest: Absolutely. So, I'm one of the Customer Experience managers here at the RTA and I'm currently looking after our Contact Centre and Dispute Resolution teams.
Host: Excellent. And I know you're super busy, so, as always, and you’re back by popular demand as well. Now today we're talking about when a rental property is for sale. First thing I’ve got to ask you is: what are the options for tenants when a rental property is actually up for sale?
Guest: I suppose there's a few different options available for tenants, depending on, I suppose, a few different factors. So, what time we're at in the tenancy, what they're looking to do, what outcome that they're looking for can impact, I suppose, the information that's relevant. So, to try and, I suppose, break that down, just going to explore a few different scenarios with you.
Host: Yeah. So, OK, let's look at the first one. If the tenant has just signed the agreement in the past two months, what happens there?
Guest: So, if they've just signed it in the last, within the last two months, and they are notified that the premises is for sale by the property manager or if they enter to show a prospective buyer through, the tenant can look to end their agreement within the first two months and two weeks. So, they get an additional two weeks at the end and that way if the, I suppose, the notice is given to them a day before that two months ends, they do have a bit of time to decide what they want to do. And they can give that notice to leave with just—or notice of intention to leave—with just two weeks’ notice.
Guest: So that notice again, just to clarify if they are intending to leave, they need to provide that notice within two months and two weeks of the tenancy agreement starting.
Host: Gotcha. So outside of that, what about at any other time?
Guest: So, at any other time it depends whether it's a fixed term agreement or a periodic. So, the difference between them: a fixed term has an end date, a periodic agreement is when it's just ongoing with no agreed end date in the lease. So, when it's a fixed end date, the property manager can't actually ask for tenants to leave during that period. They have to honour the lease agreement. If the property manager intends to sell the premises with vacant possession, they would actually need to come to a mutual agreement with the tenant.
So, from a tenant’s point of view, they may incur some costs. So that will be something that they can have a discussion about. If they need that vacant possession, what does the tenant need in order to be able to agree to that, if they are going to have to find a new property and cover those removalist costs, all things to be considered. If there is an agreement, it's really, really, really important that all parties get that written down and make sure they're on the same page. The last thing anyone wants is a last-minute complication.
Host: Especially when it's up for sale.
Guest: Especially when it's up for sale. But if the tenants are wanting to remain in the premises, they have that fixed term lease agreement and they can look to remain there until they are potentially given notice at the end of that period if the new buyer wishes to move in.
When there's a periodic agreement in place, so there's no fixed term end date, this is a bit different. This is where, if vacant possession is required by the new or prospective owner, the tenants can be given a notice of four weeks to leave. So that should really be done as soon as practical after that term has been decided that vacant possession is required.
Host: Yeah, so there's some differences there in those time frames, isn't there, depending on the agreement? So, it's good to get really clear on which one you're on too.
Guest: Absolutely. So, if you're unsure, make sure you refer to your paperwork. Just 'cause there's a periodic agreement doesn't mean that the tenant will necessarily be asked to leave. It depends what the buyer is potentially looking for as well. They might be looking for that investment property. So having a tenant in there may really suit them. And the tenant can continue living in the premises on that periodic agreement under the same terms.
Host: Excellent. So I mean, you know, speaking to each other is probably the first thing you need to do, right? And just make sure everybody is on the same page of what they're going to do moving forward.
Guest: Absolutely. As always when we catch up and do these podcasts, communication is key.
Host: Number one.
Guest: And if people are happy to agree on something to move forward, then great. That's exactly what we like to hear. But always encourage people to put it in writing just so that they can make sure they have the same understanding.
Host: Yeah. Now I've actually been through this one myself, Matt. Tenants occupying the property will experience open homes and advertising of the property for sale, which could be a little bit intrusive. What do they need to know when it comes to entry to the property, and the photographs that are taken for advertising purposes?
Guest: That's a great question and one that we often get asked here at the RTA. People’s privacy through their tenancy is really important, as well as their quiet enjoyment, and being able to reside in the property without being, I suppose, intruded on too regularly.
So again, like with everything, we're going to break this down into few scenarios. The first being if we have a look at photographs. So, we're talking about the tenant’s privacy here, if they have all of their furniture in the property, and the managing party or the owner is looking to take some nice photographs so that they can advertise their premises for sale—if they're looking to include any of the tenant’s possessions in there, they do need their written permission in order to do that.
Guest: If they advertise those photos without getting written permission from the tenant, this may be considered an offence under the Act.
Host: Right. OK.
Guest: So, the tenant’s privacy is paramount. Obviously if they are just taking photos of the premises and it doesn't include any of the tenant’s belongings, then that's OK. But obviously we appreciate that's quite difficult to do and have them looking nice if the place is fully furnished.
Host: Yeah, I still remember when I had to go through an open house and I went and got all the family photos and I went and hid them 'cause they were going to take photos—and you don't want those things in advertising.
Guest: Absolutely. So again, we spoke about communication, just understanding to make sure that there are no confidential documents lying around, no personal photos that the tenants wouldn't want to be included in there and making sure there's plenty of time to place them elsewhere whilst the photos are done.
Host: So, we've looked at the photos. Now, what about when it comes to entering the property for viewings or inspections for the open house?
Guest: Absolutely. So again, we've got two different scenarios there. We've got your open homes, which tend to be obviously organised for a certain time, but from a property owner or seller's point of view, they may not have any idea who's going to turn up or how many people. So, when that's the case, like with having photos taken and personal belongings, written agreement is actually required in order to hold an open house. This is because obviously tenants don't know who's coming through, there's less information, I suppose, available to the property managers about what's happening, and there could be a high volume of number of people coming through, which has its advantages.
If you don't want to have those regular inspections coming in once, twice, however many times each week, holding an open home could be a really effective way of helping the premises be sold quicker as more people are able to come and view it at their own time. If you aren't comfortable with that and as a tenant, you don't want to agree to those open homes happening, that is up to you. Again, I'd encourage you to speak to the selling agent in this to really understand the benefits and the, I suppose, the impact so that you can make that decision.
If you're not comfortable with that open home, what may be the case there, is that they can enter still to show prospective purchasers around. Now, what we're looking at here is a more organised way of doing things. There might be interest shown in the property and the prospective buyers want to have a look. And they are able to do that. The selling agent is able to issue an entry notice providing at least 24 hours’ notice to come through and show these prospective purchasers round.
So the major difference between that and an open home, is this would normally be for a group of people that are known to the property manager or selling agent and that they will organise the time to come through. Now, this can't happen all the time. It's not an unlimited number of occasions they can come through. The Act is very specific in saying that the property manager or selling agent can't come through for this reason, unless a reasonable amount of time that has lapsed in between.
Obviously what's reasonable can be different depending on location, area, what the markets’ doing. So again, if you feel that they are too frequent as a tenant, or you need to do them more frequently as a property manager or selling agent, that communication piece is key—trying to agree on what both parties believe is reasonable up front. The last thing you want is to have a disagreement on the day of viewing or something like that.
Host: That could get awkward.
Guest: Absolutely, which is why communication is key.
Host: Yeah, and I think, you know, as frustrating as it can be, especially when you're a tenant, I think the best thing you can do is just try and roll with what they need for an open house 'cause it is gonna be to your benefit in the end with, you know, getting the property sold quicker.
Guest: Absolutely, which is, as we kind of discussed, if there can be that agreement upfront, if the property manager or selling agent and tenant are able to have that conversation, agree on what they feel would be the best approach to minimise the intrusion from a tenant point of view, and obviously respecting their quiet enjoyment so they can still reside in the property through the process.
Host: That's it. It's a two-way street, isn't it?
Host: So, what happens after the rental property sale is finalised?
Guest: So, after the sale has been finalised, it's important to note that the tenancy agreement does not automatically end. We spoke a little bit earlier, around time frames that are involved that need to be given. If no notice is given through that period, and as the sale is completed, the new owner may look to negotiate with you on a new fixed term agreement. They may ask you to leave without grounds if you're the tenant, and they can provide two months' notice if you're on that periodic agreement. Otherwise, they have to honour the actual lease agreement and that would continue. So, all the same terms that you were signed up with the previous managing party or owner would continue with the new owner and the tenant must be provided with a letter advising them of the new property owner, their details and where to pay rent.
Sounds like one that should be obvious, but it can be something that is forgotten about in the excitement of the sale and just making sure that obligation has happened and you don't want to get three/four weeks down the line with a new property manager and you haven't been paying rent or you've still been paying to the previous owner. So, making sure that you get that information as a tenant as the sale was being completed and so that you know who you can reach out to if there are any issues and also where you need to pay that rent from now on.
And alongside that, making sure that the bond is updated with us at the RTA so that the new landlord or property manager, if they engage with a different provider, is registered on the bond. That would just make things a bit quicker come time to looking to get a refund.
So, the other important or common topic that we talk about here at the RTA, something that's really worth noting, is about what happens if there's rent arrears when the property is sold. So, the rent arrears don't transfer to the new owner. So, if there is any money owing as the property is sold, the previous property owner can actually seek to recover those funds as money owing to them. So, this is no longer, I suppose, an impact on the tenancy agreement, that continues with the new property owner and the obligation for the tenant to pay rent continues with them. But these rent arrears, or money outstanding, can actually be sought from the previous property owner as a debt owing to them.
Guest: So again, communication is key—making sure that people understand if there's any money outstanding and what any repayment schedule or agreement there is, if that is to be recovered. And if there's no agreement on that, then the previous or the selling party can look to recover them through that tribunal process as a debt owing to them.
Host: So, when owners change, some tenants may experience rent increases. What are the rules around that?
Guest: Yeah, so rent increases are, I suppose, a common part of any tenancy agreement—that there are timeframes and rules around when it can happen. So, if we're talking about a periodic agreement, it needs to have been at least six months since the rent had been increased, and the new owner would need to provide at least two months’ notice in writing that they are looking to increase the rent.
When there's a fixed term agreement in place, if they are looking to increase the rent through that, it must already be stated in the lease agreement how that's to be worked out, or that there will be an agreement if there's no special term that covers that, and then the rent can't be increased drawing that fixed term. If it isn't there, it does need to be as specific as it can to talk about when it will happen, and the same two months’ notice would need to be provided in writing to notify the tenant that is going to take effect and when from.
The other common way that rent would be increased, if it's a new property manager coming in or a new owner, and they want to have a fixed term lease agreement from a periodic, or if the old fixed term agreement is coming to an end, they may look to offer a new tenancy agreement. And again, at that point, they would look to put forward what the new rent would be. And the same notice period still applies—there must be at least six months since the last one, the last rent increase. But it's really up to parties at that point to agree on what the rent should increase to. And from a tenant’s point of view, there are guidelines in the Act that talk about the increase cannot be excessive. So, if they do feel that the change to the agreement is excessive, then they can apply through a tribunal to have that reviewed.
Fortunately, not one that we commonly hear of, but important to note that, if there has been that excessive increase that the tenants do have options after they’ve signed the agreement and that they can seek that to be reviewed through a tribunal. It’s always important from their point of view to consider why they believe it's excessive. Considering the stuff like the amount it's increasing by; the percentage it's increasing by; what's happening in the market in the area at the time—these are all factors that they will need to consider before determining whether they believe that it’s excessive.
Host: Well, there's a lot to consider, isn't there, when a property is up for sale and, you know, again, remembering what kind of agreement that you're on as a tenant and those rights and responsibilities and notice periods, and to communicate, as always.
Host: Well, thanks Matt, for helping us to get a greater understanding on everything that we need to know for when a rental property is up for sale. Thank you for listening to the Talking Tenancies podcast. Thank you for listening to the Talking Tenancies podcast. For more information about the Residential Tenancies Authority visit rta.qld.gov.au.
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