Some comments on the treatment of tenancies in residential contracts

Some comments on the treatment of tenancies in residential contracts

The standard form contracts for residential property in Queensland (whether they be for property in a body corporate or a “stand alone” piece of land) contain a section calling for the insertion of details of tenancies affecting the property. For instance, they ask for the tenant’s name, the rent payable, the bond held and the starting and end dates of the tenancy. What is the relevance of all of that information to your conveyance?

The fundamental relevance is that the contract will almost always contain a provision which requires the seller to give the buyer “vacant possession” of the property on settlement. That is pretty logical – if you buy a property you expect to be able to take possession of it. The listed tenancies operate as an exception to that rule. They are basically the seller saying “I can’t give you possession on settlement because of these tenants I have let the property to, but other than that it is yours”.

Not everyone (indeed not everyone who prepares contracts for people to sign) appreciates that the contracts operate in that way, so some interesting situations can arise.

We sometimes see tenancy details inserted even though the expiry date of the tenancy is before the settlement date of the contract. Most commonly it would happen in a case where a fixed term tenancy agreement has ended and the tenants remain in place on a periodic tenancy, but the person drafting the contract has (not unreasonably) inserted the details from the expired tenancy agreement. In such a case, it would be better to state that the tenancy was a periodic tenancy, or to insert a special condition into the contract to explain exactly what the situation was and how it affects the party’s obligations under the contract. Otherwise, confusion can arise. A buyer could argue that because the tenancy was stated as ending before settlement, the seller had an obligation to deliver vacant possession on settlement.

Another issue which can arise has to do with the stated expiry date of a tenancy. Under Queensland law, a tenant does not necessarily have to vacate the premises on the expiry date of a fixed term tenancy. To force them to do so, a notice to leave must be served on them at least 2 months before the end of the tenancy. If such a notice is served at a later time, then they still have 2 months from service to leave. That can come as an unwelcome surprise for home buyers wanting to get into their new property as soon as possible. So, if you see a tenancy stated in the contract with an expiry date that ends less than 2 months after settlement, and it is important to you to get possession of the property on or very close to the stated date, make sure you get the seller to prove to you before you sign that they have served the required notice on the tenants!

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