Selling a property that is currently rented to a tenant can be more complicated than selling a vacant property.
If you are a landlord in Victoria and want to sell your investment property, you may have questions such as:
Can I sell the property while the tenant is still living there?
Does the tenant have to move out before I sell?
Can I have inspections and open homes?
What happens to the lease if the property is sold?
The good news is that you can generally sell a tenanted property in Victoria. However, you need to consider the tenant’s rights, the terms of the rental agreement and the requirements that apply to inspections and notices.
This article explains the key things Victorian property owners should know when selling a property with a tenant.
Can I sell a property while it is tenanted?
Yes.
A property can generally be sold while a tenant is living in it.
You do not necessarily need to wait until the tenancy ends before putting the property on the market.
However, the sale does not automatically end the tenant’s rental agreement.
If you decide to sell while the property is occupied, you need to manage the sale in a way that respects the tenant’s rights and complies with Victorian rental laws.
Consumer Affairs Victoria also recognises that a rental property can be sold with an existing rental agreement.
Does the tenant have to move out before I sell?
Not necessarily.
There are generally two different approaches:
Option 1: Sell the property with the tenant in place
You can sell the property as an investment property with the existing tenancy continuing.
This may appeal to buyers who are looking for an investment property and want an existing tenant and rental income.
Option 2: Sell the property with vacant possession
You may instead want the property to be vacant when the buyer takes possession.
If you want to sell with vacant possession, you need to carefully consider the tenancy agreement and the Victorian rental laws before promising vacant possession in the Contract of Sale.
Do not assume that selling the property automatically means the tenant must leave.
The correct process depends on the circumstances of the tenancy and the reason for ending it.
What happens to the tenant’s lease when the property is sold?
Selling the property does not necessarily end the tenancy.
If the property is sold with the existing rental agreement continuing, the buyer may become the new rental provider and the tenancy can continue.
This is an important point for sellers.
If you have a fixed-term lease, you should not assume that you can simply terminate it because you have decided to sell.
Before advertising the property, discuss the tenancy with your property manager and obtain appropriate advice about your options.
Can I sell an investment property with a fixed-term lease?
Yes, a property can be marketed and sold while a fixed-term tenancy is in place.
However, the buyer needs to understand the tenancy arrangements.
For example, if the tenant has a fixed-term agreement that continues for another 12 months, a buyer who wants to move into the property immediately may not be interested in purchasing it unless the tenancy can legally be ended or another arrangement is made.
This is why sellers should consider the tenancy arrangements before deciding how to market the property.
Can I sell the property with a tenant on a periodic tenancy?
A property can also be sold while a tenant is on a periodic rental agreement.
However, if you want the tenant to leave so that you can sell the property with vacant possession, you need to follow the applicable Victorian notice requirements.
The rules concerning notices to vacate depend on the circumstances.
Consumer Affairs Victoria currently states that where a property is to be sold or put up for sale and vacated immediately after the rental agreement ends, a rental provider may be able to give a notice to vacate, but specific evidence must be provided and the applicable notice period must be followed.
Because these rules can change, sellers should obtain current rental-law advice before issuing a notice.
Can I tell the tenant that I am selling?
Yes.
In fact, the tenant needs to be properly notified before certain sales-related inspections can take place.
If the property is being sold, there are specific requirements concerning notice to the renter and entry to the property.
Consumer Affairs Victoria states that where a rental provider wants to show the property to prospective buyers, the renter must be told that the owner intends to sell the property at least 14 days before the proposed entry, using the required Notice of intention to sell process.
Your property manager or real estate agent should help manage this process.
Can potential buyers inspect the property while the tenant is living there?
Yes, but there are rules.
A rental provider or agent can enter the property to show it to prospective buyers if the property is going to be sold, provided the relevant entry requirements are followed.
The tenant must receive the required written notice.
For sales inspections, Consumer Affairs Victoria currently states that:
- The tenant must be told about the proposed sale at least 14 days before the relevant entry.
- The rental provider or agent must make reasonable efforts to agree with the tenant about inspection days and times.
- The property may generally be shown to prospective buyers no more than twice per week.
- Each inspection may generally last no longer than one hour.
- Different arrangements can be agreed with the tenant.
There are also rules about the time of day when entry can occur.
The rental provider or agent generally cannot simply turn up at any time that suits them.
Does the tenant have to allow open inspections?
There are specific rules about inspections, and the tenant has rights regarding entry.
Consumer Affairs Victoria states that where a property is being shown to prospective buyers, the rental provider or agent must make reasonable efforts to agree with the tenant about suitable inspection times.
There are also special protections in some circumstances, including where a person living at the property is a protected person under family violence or personal safety laws.
For this reason, it is generally better for the selling agent and property manager to communicate with the tenant early rather than treating inspections as if the property were vacant.
Does the tenant receive compensation for sales inspections?
Yes.
Consumer Affairs Victoria currently states that when a rental provider or agent enters the property to hold an open inspection or show the property to a prospective buyer, the renter must be compensated.
The compensation is currently:
Half a day’s rent or $30, whichever is greater, for each sales inspection.
This is an important cost for sellers to understand when planning a sales campaign.
Can the agent take photos of the property while it is tenanted?
There are specific entry and notice requirements for taking photos or videos for advertising.
Consumer Affairs Victoria currently states that a rental provider or agent must generally provide 7 days’ notice for entry to take photos or videos for advertising purposes.
Sellers should also be mindful of the tenant’s privacy and personal belongings.
The selling agent and property manager should coordinate the advertising process appropriately.
Can I ask the tenant to keep the property tidy?
You can certainly discuss practical arrangements with the tenant and selling agent, particularly if inspections are being conducted.
However, a tenant still has rights under the rental agreement and Victorian rental laws.
It is generally better to work cooperatively with the tenant rather than creating unnecessary conflict during the sales campaign.
A cooperative tenant can make the selling process significantly easier.
What if the tenant does not want the property sold?
The tenant generally cannot prevent you from selling your property simply because they are living there.
However, the tenant has rights concerning their rental agreement, privacy and access to the property.
You still need to follow the correct legal process for inspections and any proposed termination of the tenancy.
If there is a dispute about access or the tenancy, you should obtain appropriate rental-law advice.
Can I give the tenant notice to leave because I want to sell?
Possibly, but you cannot simply ask the tenant to leave without following the applicable Victorian rental laws.
There are specific circumstances in which a rental provider can give a notice to vacate because the property is being sold or is to be sold.
Consumer Affairs Victoria currently states that where the property is to be sold or put up for sale and vacated immediately after the rental agreement ends, the rental provider can give a notice to vacate subject to the required notice period and supporting evidence.
The current rules also provide that a rental provider cannot use this process to shorten the fixed-term rental agreement before its agreed end date.
Because notice requirements are important and can change, landlords should check the current requirements before issuing a notice.
What evidence may be required if the property is being sold?
If a notice to vacate is being issued because the property is to be sold or put up for sale, Consumer Affairs Victoria currently states that evidence must accompany the notice.
The evidence may include:
- A signed and dated Contract of Sale;
- A signed authority or contract of engagement with a licensed estate agent; or
- A Contract of Sale being prepared by a conveyancer or Australian legal practitioner.
This is another reason why sellers should not issue a notice to the tenant casually or before confirming the correct process.
What happens if the property sells with the tenant still living there?
If the property is sold with the tenancy continuing, the buyer needs to understand that the property is being sold subject to the existing rental arrangements.
The buyer may become the new rental provider.
The tenant does not necessarily have to leave simply because the property has changed owners.
The selling agent, property manager and conveyancer should make sure the transaction is structured consistently with the tenancy arrangements.
What if the Contract of Sale says “vacant possession”?
This is an important issue.
Vacant possession generally means that the buyer is entitled to receive the property free from occupants at settlement, subject to the terms of the contract.
If your property is currently tenanted and you sign a Contract of Sale requiring vacant possession, you need to make sure that you can legally provide vacant possession by settlement.
Do not simply rely on the assumption that the tenant will leave.
If the tenancy cannot legally be ended by the required date, you could face serious problems with your contractual obligations to the buyer.
This is why the tenancy should be discussed with your conveyancer and property manager before signing the Contract of Sale.
What if the buyer wants to move into the property?
This is one of the most important issues to consider when selling a tenanted property.
A buyer may want to purchase the property as their home rather than as an investment.
If there is an existing tenancy, the buyer may not be able to move in immediately.
The selling agent should clearly understand the tenancy arrangements and communicate them to prospective buyers.
The Contract of Sale should also be consistent with the agreed position concerning possession.
What happens to the rent before settlement?
Until settlement and the relevant transfer of the property and tenancy arrangements, rent continues to be dealt with under the existing rental arrangement.
At settlement, adjustments may be required between the seller and buyer depending on the rent received and the settlement date.
Your conveyancer will consider the relevant rental income and other adjustments as part of the settlement process where applicable.
What happens to the rental bond?
The treatment of the rental bond depends on whether the tenancy continues or ends.
If the property is sold with the tenancy continuing, the bond is generally dealt with as part of the transfer of the tenancy arrangements rather than simply being treated as part of the seller’s sale proceeds.
If the tenancy ends, the bond is dealt with through the Residential Tenancies Bond Authority (RTBA) process.
Consumer Affairs Victoria states that at the end of a tenancy, the rental provider or agent and renter need to agree on how the bond is to be disbursed, with the claim submitted to the RTBA.
Sellers should therefore speak with their property manager about the bond well before settlement.
What happens to the property manager?
If the property is sold as an investment with the tenancy continuing, the property management arrangements may also need to be transferred or changed.
The buyer may:
- Continue with the existing property manager;
- Appoint a new property manager; or
- Manage the property themselves.
The selling agent and property manager should coordinate the handover.
What should I tell my conveyancer?
If you are selling a tenanted property, tell your conveyancer as early as possible.
Provide details such as:
- Whether the property is currently rented;
- The tenant’s name;
- The type of rental agreement;
- The commencement and expiry dates of any fixed-term agreement;
- The current weekly rent;
- The property manager’s details;
- Any notices already given to the tenant;
- Any disputes or VCAT matters;
- Whether you intend to sell with vacant possession; and
- Whether the buyer is expected to take over the existing tenancy.
This information can help your conveyancer identify potential issues before the contract is signed.
What should I do before putting a tenanted property on the market?
Before starting the sales campaign, consider the following:
1. Review the rental agreement
Find out whether the tenancy is fixed-term or periodic and check the relevant dates.
2. Speak with your property manager
Your property manager can explain the current tenancy position and help manage communication with the tenant.
3. Decide whether you want to sell with or without vacant possession
This can have a significant effect on your potential buyers.
4. Speak with your conveyancer
Your conveyancer can review the proposed sale arrangements and make sure the Contract of Sale is consistent with the intended transaction.
5. Plan inspections properly
The tenant must receive the required notices and be treated in accordance with Victorian rental laws.
6. Tell the selling agent about the tenancy
The selling agent needs accurate information about the tenancy so prospective buyers can be properly informed.
7. Do not promise vacant possession unless you can provide it
This is particularly important.
If the property is tenanted, make sure the tenancy can legally end by the required date before agreeing to sell with vacant possession.
Selling a tenanted property privately
If you are selling the property without a real estate agent, you still need to consider the tenant’s rights and the requirements for entry and inspections.
You will also need to ensure that the Contract of Sale and Section 32 Vendor Statement are properly prepared.
Consumer Affairs Victoria recommends engaging a conveyancer or legal practitioner to prepare the Section 32 and Contract of Sale when selling property privately.
Selling privately does not remove your obligations as a rental provider.
Common mistakes when selling a property with a tenant
Mistake 1: Assuming the tenant has to leave because the property is being sold
A sale does not automatically end a tenancy.
Mistake 2: Promising vacant possession without checking the tenancy
If the tenant has a fixed-term agreement, this can create significant problems.
Mistake 3: Allowing unlimited inspections
There are rules governing entry to a rented property, including notice requirements and limits on sales inspections.
Mistake 4: Forgetting about inspection compensation
Sellers should factor the required compensation for sales inspections into their selling arrangements.
Mistake 5: Ignoring the tenant’s privacy
The property may belong to you, but the tenant has legal rights while they are renting it.
Mistake 6: Waiting until settlement to deal with the tenancy
The tenancy should be addressed well before settlement, particularly if vacant possession is required.
Frequently Asked Questions
Can I sell my property if it has a tenant?
Yes. A property can generally be sold while it is tenanted.
Does selling the property automatically end the lease?
No. Selling the property does not automatically terminate the tenant’s rental agreement.
Can I sell with the tenant still living there?
Yes. You can potentially sell the property with the existing tenancy continuing.
Can the buyer move in immediately after settlement?
Not necessarily. This depends on the tenancy arrangements and whether vacant possession has been agreed and can legally be provided.
Can I make the tenant leave because I want to sell?
Not simply because you want them to leave. You must follow the applicable Victorian rental laws and notice requirements.
Can I hold inspections while the property is tenanted?
Yes, but specific notice and entry requirements apply. Consumer Affairs Victoria currently requires at least 14 days’ notice of the intention to sell before sales inspections and limits the frequency and duration of inspections.
Does the tenant get paid for inspections?
Yes. For sales inspections, the current compensation is half a day’s rent or $30, whichever is greater, per inspection.
What if the buyer wants vacant possession?
The seller needs to make sure the tenant can legally vacate by the required date. This should be considered before signing a contract requiring vacant possession.
What happens to the tenant’s bond when the property is sold?
The treatment depends on whether the tenancy continues or ends. The property manager should coordinate the bond arrangements through the RTBA where required.
Should I sell the property with the tenant or wait until it is vacant?
There is no single answer. Selling with a tenant may appeal to investors, while vacant possession may make the property more attractive to owner-occupier buyers. Your agent, property manager and conveyancer can help you consider the appropriate approach.
How Prox Conveyancing Can Help
At Prox Conveyancing, we assist Victorian property sellers with the conveyancing process from contract through to settlement.
If you are selling an investment property with a tenant, we can help you understand the conveyancing implications of the sale and coordinate with your property manager, real estate agent, buyer’s conveyancer or solicitor and lender where applicable.
We can assist with:
- Reviewing the Contract of Sale and Section 32
- Considering whether vacant possession is required
- Managing the sale conveyancing process
- Coordinating settlement adjustments
- Communicating with the buyer’s conveyancer or solicitor
- Coordinating with your lender where a mortgage is involved
- Working with the selling agent and property manager
- Preparing for electronic settlement
- Confirming settlement and completion
If you are thinking about selling a tenanted property in Victoria, it is a good idea to discuss the tenancy arrangements with your property manager and conveyancer before you put the property on the market or sign a Contract of Sale.
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 advice. Every property transaction is unique, and the information above may not apply to your particular circumstances. If you require advice about your specific situation, please contact a qualified legal professional or licensed conveyancer.