Things you need to be aware of when selling a tenanted property:
Sam from Loan market gave us some great detail we have used below:
If you decide to sell with an existing tenancy in place.
- Selling with a fixed term tenancy in place can limit your market for potential buyers.
- If a property is sold with a fixed term tenancy that will run for +45 days past the settlement date, for the purchasers, lenders may treat these properties as residential investment even if the purchaser intends to occupy the property once it is vacant.
- Because of that residential investment classification, if a buyer is purchasing through a bank they may be required to put a significantly higher deposit towards the purchase (i.e. 40% as per the current RBNZ residential investment LVR restrictions).
- This may potentially exclude first home buyers or other owner-occupiers from making an offer on the property as they may not have the capacity to cover that level of deposit.
If you want to sell with vacant possession.
- Tenants on periodic tenancy: It is your responsibility to give your tenant at least 90 days’ written notice to end the periodic tenancy so the house will be empty for the buyer. This may affect the settlement date for the property sale.
- Fixed-term lease: If settlement occurs during the term of the lease, the property must be sold with the tenancy and tenants in place. The buyer then becomes the new landlord for the rest of the fixed-term. You may be able to sell the property empty if the tenant agrees, in writing, to end the fixed-term early.
- If the fixed-term tenancy was granted on or after 11 February 2021, you can end the tenancy on expiry (or later) with 90 days’ written notice, if the sale of the property has a requirement that the house is empty for the buyer.
Tenancy Services has more information about ending a fixed-term early here.
Another point from Sam
If you are selling a property that forms part of the overall security for multiple loans, depending on the guarantee or security structure you may want to check with your lender or mortgage broker whether the lender will require more of the net proceeds of sale to be put towards reducing debt than you may be anticipating. Whenever a property is being sold that is mortgaged, lenders will re-assess the overall portfolio to determine how much debt they need to have repaid from the sale in order to meet their obligations under the LVR limits. This can catch people out so it's definitely worth exploring this in advance of any sale to understand what your options are.