SELLING A RENTAL PROPERTY
New Zealand landlords must give 90 days’ (at least three months) notice if they want to end a tenancy to sell a property.
If selling the property with vacant possession, landlords have to give 90 days' notice to end a periodic or fixed term tenancy.
If the rental property is being sold as a going concern, with the current tenancy to continue, the landlord needs to let the tenants know about the intention to sell in writing - more on that scenario below.
However, if the still tenanted property is eventually sold to someone who requests that it be vacant on settlement, the landlord must still give at least 90 days written notice. This may affect the settlement date and must be a requirement of the sale going unconditional.
These changes to tenancy law were introduced in February 2021.
SELLING A RENTAL PROPERTY PORTFOLIO
If you have rental properties to sell in one or several locations, Agent Finder NZ independently vets real estate agents for investors nationwide. Give them a call 0800 789 532 or send a message. It's a genuine free service.
SELLING YOUR RENTAL WITH TENANTS IN PLACE
When letting tenants know you intend to sell the property with them still in place, you still need to put it in writing. It is a good idea as a courtesy to deliver the letter in person – but don’t turn up unannounced.
If this is not physically practical, a phone call will suffice but ensure you follow this up with the letter of intention. Let them know well before the house goes on the market, taking into consideration that this will be a stressful time for your tenants.
Once the property sale has gone unconditional, if the place remains tenanted, the landlord provides the new owner with a copy of the tenancy agreement.
SOME RENT BETTER THAN NONE WHEN SELLING
It can be a good idea to offer a rent reduction to gain tenants’ co-operation to keep the property well presented during the sale process.
The rent you receive might be less but better than none at all compared to if you give notice to end the tenancy then list it for sale while empty. In the current market, the number of days on market can take longer so this is well worth considering.
This is also good practice if you are selling with the tenants in place as they will be there throughout the process.
TENANTS’ CONCERNS ABOUT VIEWINGS
Although the landlord owns the property, it is considered in tenancy law to be the tenants’ home which gives them certain rights.
Tenants are more likely to be receptive to ‘viewings by appointment’ rather than open homes. Discuss this with them prior to listing so there are no surprises.
Selling a rental property involves things tenants might view as intrusive such as real estate photographs of their possessions/home, buyer viewings or ‘real estate caravans’ whereby the appointed real estate agent will invite their team to view the property. (You may want to direct your real estate agent to take the tenants' perspective into account.)
You will need tenant permission to use photographs of their belongings.
PROS OF SELLING A RENTAL WITH TENANTS IN PLACE
- Retaining tenants shows the property has a viable income making it attractive to other landlords, including mum and dad investors taking on a second property and becoming landlords for the first time. However you will want to consider the Healthy Homes obligations and deadlines.
- Your rental income continues through the sale period (maybe at a reduced rate in exchange for the upkeep of presentation).
- It’s often better for the tenant as they get to keep their home for longer.
If your rental property is in Auckland and zoned for development, investors often prefer to have ongoing tenants until such time they are ready to proceed with any development which in many cases can take years. However selling properties zoned for development is a specialist area.
PROS OF SELLING WITH VACANT POSESSION
- If the tenants have left it makes it easier to do renovations, repairs and maintenance.
- It is easier to home stage a vacant property (which helps drive more traffic).
- Home staged vacant properties often sell faster offsetting the loss of rental income.
- The most effective method of sale can be chosen for your property type and the current market
- Viewing times or open homes can more easily accommodate prospective buyers’ time pressures and preferences.
If you belong to a property investment group, offer to ask around for any vacant properties available on behalf of your tenants as an act of goodwill.
CHOOSING THE RIGHT REAL ESTATE AGENCY AND AGENT
Selling a rental property can be unsettling for tenants.
Using a vetted real estate agent proven to have the experience for your property type and having the tact and integrity to work with you, your tenants, your lawyer and any buyers is integral.
For example, your rental property may be an apartment which requires a substantial amount of agent experience to ensure a seamless experience and superior result. Find out more about selling an apartment.
Once you have signed an agency contract to list your rental property for sale, an introduction to your tenants will help allay trust issues and help build a cooperative relationship.
We recommend using a vetted real estate agent to avoid potential conflicts
SELLING A RENTAL – KEY TAKEAWAYS
- Good communication with tenants is essential to a successful sale.
- Notice must be formalised in writing and in the legal time frame.
- A rent reduction for the sale duration might sweeten the process.
- You will need permission to enter the property – put any schedule of visits involving the sales process in writing.
- Tenants can’t refuse access but they can set conditions.
- Tenants can ask to be present at open homes or private viewings but a cooperative relationship might help avoid the need to do so.
- Different rules apply in a mortgagee sale.
- If you have not met the Healthy Homes Standards within the time frames required, factor this into your decisions.
Some New Zealand investors are exiting the property market due to the reduction in claimable mortgage interest rates, some are reducing their risk. The reasons are many.
If thinking of selling your rental property, we have 13 years’ experience helping landlords to prepare and find the real estate agents best suited to rental property sales. Get in touch with us - we're here to help and it's a genuine free service.
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Article updated May 19, 2023 by Trish Willis | Member of Property Institute of NZ (IPAC)