Buying a property does not necessarily mean that its use will stay the same forever.
You may buy a property intending to live in it, but later decide to rent it out.
Or you may purchase an investment property and later decide to move into it yourself.
This can raise an important question:
“What do I need to do if I change the use of my property after settlement?”
For example:
“I bought this property as my home, but now I want to rent it out. Do I need to tell anyone?”
The answer is yes, you should review your circumstances before changing the use of the property.
Changing a property from a principal place of residence (PPR) to an investment property can have consequences involving insurance, your lender, council, land tax, taxation and other matters.
What Does “Change of Use” Mean?
A change of use can occur when the way you use the property changes.
Common examples include:
- Moving out of your home and renting it to a tenant
- Moving into a property that was previously an investment
- Turning a property into a short-term rental
- Using a residential property for a business
- Changing the property’s use in another way that may require approval
The consequences depend on what you are changing and how the property will be used.
I Bought the Property as My Home but Now Want to Rent It Out
This is one of the most common situations.
For example:
You purchase a property and live in it for two years.
You then move interstate and decide to rent the property rather than sell it.
The property has now changed from being your principal place of residence to an investment property.
Before making the change, consider the following.
1. Check Your Home Loan
If you have a mortgage, check your loan terms and contact your lender if necessary.
Your lender may need to know that the property is no longer your principal place of residence.
The interest rate, loan conditions or other arrangements may be affected depending on your loan.
Do not assume that your lender does not need to know.
2. Update Your Insurance
This is extremely important.
Your insurance requirements may be different when you live in the property compared with when you rent it to tenants.
For example, you may need landlord insurance or other appropriate cover.
Tell your insurer about the change in use before renting the property out.
Do not assume that a standard owner-occupier policy automatically covers a rental property.
3. Consider Council Requirements
If you change the use of your property, check whether the local council needs to be notified or whether any approvals are required.
For an ordinary residential property being rented to a tenant, there may not necessarily be a special planning approval simply because the owner has moved out.
However, different uses can have different planning or regulatory requirements.
For example, short-term accommodation, business use or other changes may require additional consideration.
Check with the relevant council if you are unsure.
4. Consider Land Tax
Changing the use or occupancy of a property can affect land tax considerations.
In Victoria, land tax is administered by the State Revenue Office.
Whether you are liable for land tax depends on your circumstances, ownership interests, exemptions and other factors.
A property that was previously eligible for a principal place of residence exemption may no longer qualify once you stop using it as your principal home.
This can be particularly important if you own more than one property.
Because land tax can be complicated, consider obtaining advice from the State Revenue Office or your accountant or tax adviser.
5. Consider Your Tax Position
If you start renting out your former home, the rental income may have tax consequences.
You may need to keep records of:
- Rental income
- Property management fees
- Repairs
- Maintenance
- Insurance
- Council rates
- Water charges
- Interest
- Other property expenses
There can also be capital gains tax considerations when you eventually sell the property.
Your conveyancer can explain the conveyancing aspects, but your accountant or tax adviser should advise you about your tax position.
6. Arrange a Property Manager
If you are renting out the property, you may decide to appoint a property manager.
A property manager can assist with:
- Advertising
- Finding tenants
- Lease arrangements
- Rent collection
- Inspections
- Repairs
- Maintenance
- Communication with tenants
Make sure the property manager understands the property and any relevant Owners Corporation rules.
7. Check Residential Rental Requirements
If you rent the property to tenants, you need to comply with the applicable residential rental laws.
This may include requirements relating to:
- Minimum standards
- Safety
- Repairs
- Smoke alarms
- Gas and electrical safety
- Entry and inspections
- Rental agreements
- Bond
- Repairs and maintenance
Rental requirements can change, so check the current Victorian requirements before renting the property.
8. Check Your Owners Corporation Rules
If the property is part of an Owners Corporation, check the relevant rules before changing the use of the property.
For example, there may be rules affecting:
- Leasing
- Short-term accommodation
- Common property
- Parking
- Pets
- Renovations
- Use of common areas
If you are considering short-term accommodation, it is particularly important to check the applicable rules and requirements.
9. What If I Want to Use the Property for a Business?
Changing a residential property into a business premises can be more complicated than simply renting it out.
You may need to consider:
- Planning requirements
- Council approval
- Zoning
- Insurance
- Owners Corporation rules
- Lease arrangements
- Licensing requirements
Do not assume that because you own the property you can automatically use it for any purpose.
Check the relevant requirements before changing the use.
10. What If I Want to Use It as Short-Term Accommodation?
Short-term accommodation can involve additional legal and regulatory considerations.
You may need to consider:
- Victorian short-stay accommodation laws
- Owners Corporation rules
- Local council requirements
- Insurance
- Tax
- Safety requirements
The rules can also differ depending on the type of property and how it is being used.
Obtain appropriate advice before commencing short-term accommodation.
11. What If I Move Into My Investment Property?
The reverse situation can also happen.
You may have purchased a property as an investment but later decide to live there.
For example:
“I have been renting out my property for three years, but now I want to move into it.”
This can also affect:
- Insurance
- Your lender
- Tax
- Land tax
- Council records
- Property management arrangements
Tell the relevant providers about the change where required.
12. What Happens to My Property Manager?
If you move into a property that has previously been rented, you will need to deal with the existing tenancy and property management arrangements appropriately.
Do not simply ask the tenant to leave because you have decided to move into the property.
The applicable tenancy laws and lease terms need to be considered.
If you are in this situation, obtain appropriate advice before taking action.
13. What About Council Rates?
Council rates generally continue to apply regardless of whether you live in the property or rent it out.
However, changing the use of the property may affect other council matters depending on what the property is being used for.
Check with the relevant council if you are changing the use beyond ordinary residential occupation.
14. What About Water Charges?
Water charges may continue to apply regardless of whether the property is owner-occupied or rented.
However, when a property becomes a rental property, the allocation of certain water charges between the owner and tenant may be governed by the applicable rental rules.
Make sure your property manager understands the relevant requirements.
15. What About Electricity and Gas?
If you move out and rent the property, your arrangements for utilities may change.
Depending on the tenancy arrangement, the tenant may arrange their own electricity and gas accounts.
However, some services or charges may remain the owner’s responsibility.
Your property manager can help explain the practical arrangements.
16. Do I Need to Tell My Conveyancer?
Usually, your conveyancer’s main role relates to the purchase or sale transaction.
If you decide to change the use of the property years after settlement, it may not be a conveyancing matter.
However, if the change is connected with a new transaction, transfer, refinancing, subdivision or other legal dealing, you may need professional advice.
For tax, land tax, insurance or tenancy matters, you may also need advice from the relevant professional.
17. What If I Change the Use Soon After Settlement?
If you change your plans shortly after buying the property, don’t assume that everything remains the same.
For example, you may have purchased the property saying that you intended to live there, but circumstances change and you decide to rent it out shortly after settlement.
Consider reviewing:
- Your loan
- Insurance
- Tax position
- Land tax
- Council requirements
- Owners Corporation rules
- Rental requirements
If the change relates to information or representations made during the purchase process, obtain appropriate advice.
18. Does Changing the Use Affect My First Home Buyer Benefits?
It can depend on the particular benefit or concession you received and the applicable eligibility requirements.
Some first-home buyer concessions or grants can have occupancy requirements.
If you received a first-home buyer benefit and are considering moving out or renting the property, check the applicable conditions before making the change.
Do not assume that because settlement has already occurred, the occupancy requirements no longer matter.
19. What If I Want to Change the Property’s Use Completely?
Some changes are more significant than simply moving out and renting the property.
For example:
- Residential property → commercial use
- Residential property → short-term accommodation
- Residential property → business premises
- Residential property → multiple dwelling use
These changes may involve planning, council, building, insurance, tax and other requirements.
Get advice before making a significant change.
A Simple Change-of-Use Checklist
Before changing the use of your property, consider:
☐ Check your home loan
☐ Contact your insurer
☐ Check council requirements
☐ Consider land tax
☐ Speak with your accountant/tax adviser
☐ Check Owners Corporation rules
☐ Review rental requirements
☐ Arrange a property manager if required
☐ Check first-home buyer benefit conditions
☐ Update utility arrangements
☐ Keep records of the change
Frequently Asked Questions
Can I rent out my home after settlement?
Generally, you may be able to rent out your property, but you should first consider your loan, insurance, tax, land tax, council and rental obligations.
Do I need to tell my lender if I rent out my home?
You should check your loan terms and contact your lender if required. Your lender may need to know that the property’s occupancy has changed.
Do I need different insurance if I rent out my home?
You should tell your insurer before changing the property’s use. You may require landlord insurance or other appropriate cover.
Will renting out my home affect land tax?
It can. Your eligibility for certain exemptions may change when the property is no longer your principal place of residence.
Will I have tax consequences if I rent out my former home?
Potentially. Rental income and future capital gains tax considerations may apply. Speak with your accountant or tax adviser.
Can I use my residential property for a business?
Not necessarily without checking the relevant requirements. Depending on the business, council, planning, zoning, insurance and Owners Corporation issues may need to be considered.
Can I use my property for short-term accommodation?
There may be additional Victorian laws, council requirements, Owners Corporation rules and insurance considerations.
What if I want to move into my investment property?
You should review your insurance, loan, tax, land tax, property management and tenancy arrangements before moving in.
Does changing the use affect first-home buyer benefits?
It can, depending on the particular benefit and its occupancy requirements. Check the conditions that applied to your grant or concession.
How Prox Conveyancing Can Help
Changing the use of a property after settlement can involve much more than simply changing where you live.
If you are considering renting out your former home, moving into an investment property, using the property for short-term accommodation or changing its use in another way, it is important to consider the consequences before making the change.
At Prox Conveyancing, we can assist with conveyancing matters connected with property ownership and transactions.
For tax, land tax, insurance, lending, planning or tenancy questions, you may also need advice from your accountant, insurer, lender, council or other relevant professional.
Planning ahead can help you avoid unexpected problems after changing the way you use your property.
About the Author
Meet Sally
Sally Kwok is a Licensed Conveyancer and the Director of Prox Conveyancing. With more than 16 years of experience in the conveyancing industry, she is committed to helping buyers and sellers navigate Victorian property transactions with confidence. Sally is passionate about providing clear communication, practical guidance and personalised service throughout every stage of the conveyancing process.
👉 Learn more about Sally on our About page.
About Prox Conveyancing
Prox Conveyancing is a Victorian conveyancing practice providing professional conveyancing services for residential property transactions across Victoria. We assist buyers, sellers, investors and families with a wide range of conveyancing matters, delivering personalised service, transparent communication and professional support from contract through to settlement.
👉 Learn more about Prox Conveyancing on our About page.
This article provides general information only and is not legal, tax, financial, insurance, planning or tenancy advice. Every property transaction and ownership situation is different. If you require advice about your specific circumstances, please contact the appropriate qualified professional.