When involved in a rental agreement, it is important to be mindful of the rights that tenants have under the relevant residential tenancies act for your jurisdiction. When a landlord wants to sell a property which is already occupied by a tenant there are notices and procedures to follow, such as a notice of intention and a notice of attornment. If not, there are grounds for an action with the relevant tribunal. Keep reading this Legal Kitz blog to find out when a notice of attornment is required.
What act do I have to follow?
While this guide has general information of your rights and obligations as a tenant or property owner, it is important to refer to your relevant state’s Act for specifics. Refer to the below links to check your state’s laws.
- Queensland: Residential Tenancies and Rooming Accommodation Act 2008
- New South Wales: Residential Tenancies Act 2010
- Victoria: Residential Tenancies Act 1997
- South Australia: Residential Tenancies Act 1995
- Western Australia: Residential Tenancies Act 1987
- Tasmania: Residential Tenancy Act 1997
- Northern Territory: Residential Tenancies Act 1999
- Australian Capital Territory: Residential Tenancies Act 1997
Before the sale: notice of intention
Property owners must consider that if there is an existing agreement with a current tenant, their agreement will take priority over any sale contract. From 1 October 2022, if the property is to be sold with vacant possession, the notice is dependent on the type of tenancy currently in place.
- If there is a fixed term lease, a tenancy can only be ended for the sale of a property at the end of the agreement’s term and by giving two months’ notice to the tenant.
- If there is a periodic lease, the tenancy can be ended at any time during the lease, by giving two month’s notice to the tenant.
If the owner intends to sell the property while the tenant’s lease is still in place, the tenant must be provided with a “Notice of lessor’s intention to sell premises”. This form covers the details of the people involved (the property owner, tenant and the selling agent), as well as information on how the owner plans to market the property. This notice is vital, as there can only be an open house or on-site auction if the tenant has agreed in writing. There is a requirement that the tenant still has ‘quiet enjoyment’ of the property while it is being marketed.
What if there has been no notice of intention to sell the premises?
If the property owner has not disclosed the intention to sell the premises before entering into an agreement and has already prepared a contract for sale, a tenant can apply to the Tribunal for a termination order without giving the property owner a termination notice. A tenant may also seek compensation for any costs incurred as a result of the termination, such as the cost of finding new accommodation.
After the sale: notice of attornment
Once a property has been sold, any fixed-term lease which the tenant holds must be honoured, and a notice of attornment must be supplied. If the tenant and property owner choose to do so, there is the option for a mutual negotiation where the tenant may seek compensation for the premature termination of the contract.
If the tenancy is continuing, a notice of attornment (in letter form) must be given to the tenant with notice of:
- The new property owner;
- The new owner and/or their managing agent’s contact details; and
- Where to pay rent.
A periodic lease has more leniency for property owners. If the purchaser requires vacant possession, the tenant must be given at least four weeks’ notice from the signing of the contract of sale. There is no requirement for a notice of attornment.
If you are the property owner, a “change of property manager/owner” form must also be given to the Residential Tenancies Authority for the bond.
What if the tenant has already paid rent in advance?
If the tenant has already paid rent in advance, this should be reflected in the sale price between the previous owner and the new owner, and should have no impact on the tenant. If there are any unpaid dues, these will still need to be paid to the new owner.
If a tenant has paid a cash bond, this should still be recognised under the new property owner.
If a tenant has provided a cash guarantee, they will usually need to provide a new bank guarantee in favour of the new property owner. The new and old property owner will exchange the existing bank guarantee and new bank guarantee at settlement.
Legal advice
It can be difficult to keep on top of the rights and obligations each party has when in the process of selling a house with an ongoing tenancy. Don’t open yourself to liability by failing to supply a notice of attornment: seek professional advice. Legal Kitz is here to help! Click here to book your free 30-minute consultation.
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