01 Apr Investing in a Rental – And dealing with Tenants!
Not every Queensland property purchase is the new residence of its Buyer.
Although most investing property buyers have gone through the Conveyancing process previously, it’s always good to have a refresher and some pointers for when you are buying that investment property and becoming a landlord!
Mostly, what we’ll focus on here is purchasing a property that has an existing tenancy agreement in place and some of the things you need to be aware of as a Buyer.
INSPECTIONS AND SEARCHES
Like any Queensland property transaction, regardless of there being a tenant in the house or apartment or not, you still have to go through the process of inspections and searches. READ OUR BLOG ON SEARCHES.
Having an on-going tenant will add time to these, particularly when the property needs to be accessed – however the selling Real Estate agent coupled with the Seller’s rental management agency will handle this on your behalf. You just have to be patient – it might take a day or two longer per requirement given the Rental Tenancy Agreement in Queensland.
As per any property purchase agreement, the property becomes the risk of the Buyer from 5pm the first business day after the Contract date – NOT the Settlement date.
To this end, insurances need to be sorted by the Buyer in time to be in place for that first business day after signing the contract.
Like any Queensland property purchase with a Body Corporate or Strata management in place – whether the residence is leased or not – you should always do your research into the costs associated with this and any other potential costs (for example, if there’s a resolution passed to fully paint the building after you settle and the costs exceed the sinking fund, therefore requiring you – unexpectedly – to contribute in your share of the excess costs).
The Seller needs to provide you access to minutes from recent (after the Contract is signed) Body Corporate meetings and any upcoming resolutions that have been made by the committee – so as to avoid situations like that outlined above.
Importantly, if the Seller hasn’t informed you of any upcoming resolutions as at the Contract Date and you are materially prejudiced, you may be entitled to terminate your contract or, pursue compensation from the Seller. Therefore, it is vitally important that you get this information and that the Seller or their agent, provides it to you.
A Body Corporate Inspection of Records Search will give you this information and the best advice is to get it yourself, rather than relying on the Seller.
WHAT TO DO IF THERE IS A TENANT IN PLACE?
The selling Real Estate agent should advise the current situation with lessees/tenants during your opening discussions. The tenancy details should also be disclosed on the Contract.
If the property you are buying is being sold with a Queensland Residential Tenancy Agreement in place, you should obtain a copy of that agreement before signing the contract.
Of course, depending on the circumstances of the tenancy agreement and if you wish to take control or move into the property yourself, there may be options to do this. Once we understand what the Seller has in place, we can work through those options with you.
Buyers wanting to move into their new property should be aware there are limitations on stamp duty concessions if a property is tenanted at settlement.
Contact us at Top Gun Conveyancing to get more details or click through to the Queensland Government’s site for more on transfer duty.
With any rental, there is a Bond in place to cover off any repairs following the termination of the lease with the tenant, whether the tenant leaves or you wish to re-purpose the use of the property. Usually, this amounts to four weeks of rent at the time of agreement and will be held in escrow by the Residential Tenancies Authority (RTA) and returned to the tenant at completion of their time in your property.
This process will also help with the transition of ownership and where the rent is paid should you be managing this personally, or if you choose to move the management of the property to a new property manager.
The usual process for the transfer of the tenancy agreement and bond is as follows:
- A Residential Tenancies Authority ‘Form 5’ Change of Lessor or Lessor’s Agent is prepared by your proposed management agent.
- The Form 5 is sent to the Seller’s management agent to sign.
- The completed and signed Form 5 is made available either at settlement or to your new management agent shortly afterwards.
- Your agent will lodge the Form 5 with the Residential Tenancies Authority.
- Following Settlement you should arrange for a copy of the Form 5 to be sent to the tenant along with your payment details for future rent.
Particularly if this is your first investment property, it is an exciting time. If there are tenants in place, you want to make the transition as seamless for them as much as it is for yourself.
Our team at Top Gun Conveyancing will guide you through the latest addition to your investment and property portfolio.