In our practice, the single line on a contract that says 'vacant possession' or 'subject to existing tenancy' decides whether you can move in on settlement day — and it is one of the easiest things to get wrong. A property that looks empty at an inspection can still be under a lease that a sale cannot cut short, so the tenancy position and the settlement date have to line up before anyone signs.
Vacant possession vs subject to a tenancy
Sold with vacant possession
If the contract provides for vacant possession, no tenant or other party will be occupying the premises once settlement completes, and you are free to rent it out or move in. Note that vacant possession does not necessarily mean the property must be cleared of all debris; it means no one is living inside. If you need the property professionally cleaned by settlement, that must be negotiated as an additional special condition and paid for by the Seller before signing.
Sold subject to an existing lease
If the contract is subject to lease, the tenant occupying the premises remains after settlement and continues paying rent to the new owner. You will be unable to move into the property until the tenancy agreement period ends or the tenancy is lawfully terminated. All terms of the existing tenancy agreement bind you from the settlement date onwards, so you should review the tenancy agreement documentation before you commit. If you want to move in soon after settlement, you need to negotiate with the Seller about whether and when vacant possession can be given, otherwise you will not be entitled to vacant possession on settlement.
Fixed-term vs periodic tenancies
Selling a property does not, on its own, end a tenancy early — this holds across all states. If the tenant is on a fixed-term lease, they generally have the right to stay until the fixed term ends, and a buyer who settles before then inherits the tenant. If the tenancy is periodic, the seller can usually give the tenant a notice to leave on the ground that the property has been sold with vacant possession, but the required notice period and the correct form are set by each state's tenancy legislation — and several states have reformed these rules recently. Count the notice period back from your intended settlement date, and confirm the current requirement for your state with your conveyancer before committing. The common trap is agreeing to a short settlement on a vacant-possession contract when a tenant still has time left to run. See the five checks we run on every contract.
Rent and bond at settlement
When you buy subject to an existing tenancy, rent and bond are handled at settlement: rent the seller has already collected for a period after settlement is adjusted in your favour, and the rental bond is transferred so you hold it as the new lessor through your state's bond authority. Your conveyancer builds these into the settlement adjustments. See common settlement adjustments for how rent and other items are apportioned.
Why the state matters
Tenancy law is state-based. Beyond the vacant-possession-vs-lease distinction, states differ on things like how disclosure of past tenancies works, how often rent can be increased, and a Seller's obligations not to change the property (including terminating a tenancy) after the contract date. See your state's page for the specifics: Queensland (QLD) and Victoria (VIC). New South Wales (NSW) content is not available yet.