The single line on a contract that says 'vacant possession' or 'subject to existing tenancy' decides whether you can move in on settlement day. A property that looks empty at an inspection can still be under a lease that a sale cannot simply cut short, so the tenancy position and the settlement date have to line up before anyone signs.
An empty-looking house isn't necessarily a property being sold with vacant possession.
Vacant possession vs subject to a tenancy
Sold with vacant possession
If the contract provides for vacant possession, the seller must hand the property over at settlement free of occupants, and without an existing tenancy or other right to occupy continuing after settlement, so you can take possession. It does not automatically mean the property will be professionally cleaned or cleared of every item. If you also need the property professionally cleaned or specific items removed, make that a separate requirement in the contract.
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 take over the property with the tenancy continuing, subject to the rights and obligations that apply under the tenancy and the contract.
You generally can't move in while the tenancy continues, unless the tenancy ends or is lawfully terminated.
Review the tenancy agreement documentation before you sign, including the current rent, whether the tenancy is fixed-term or periodic, the end date if there is one, the bond position, and any notices already given.
If you want to move in soon after settlement, negotiate with the seller about whether and when vacant possession can be given. Don't assume you will receive vacant possession at settlement.
Fixed-term vs periodic tenancies
Selling a property does not, on its own, end a tenancy early. 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 generally takes over as landlord with the existing tenancy continuing.
For a periodic tenancy, the seller may be able to give the tenant notice because the property is being sold with vacant possession, but whether they can do this, and the notice and form required, depends on the state. Several states have reformed these rules recently.
That means the tenancy position should be checked before a settlement date is agreed. Work backwards from the proposed settlement date to make sure the required notice period can run, 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. The bond isn't normally handed to you as cash. The relevant bond authority's records are updated so you are recognised as the new lessor. 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 the notice periods that apply. See your state's page for the specifics: Queensland (QLD) and Victoria (VIC). For a property in another state, check the tenancy rules that apply where the property is located.
Common questions
What happens if I buy a property with a tenant?
The existing tenancy generally continues and you become the landlord after settlement. Before signing, check the tenancy agreement, rent, bond, tenancy type, end date and any notices that have been given.
Can I buy a property and ask the tenant to leave?
Not simply because you have bought the property. If the property is sold subject to an existing tenancy, the tenancy generally continues, and any request or notice to end it must follow the tenancy rules that apply in that state.
Can I get vacant possession on a 30-day settlement?
Not necessarily. If a periodic tenancy is still in place, the settlement period needs to allow the required notice period to run, and that notice may not be able to start until the contract is signed.
