In our Victorian practice, the tenancy box on the Particulars of Sale is one of the smallest things to tick and one of the most expensive to get wrong. A property that looks empty when you inspect it can still be under a lease that a sale cannot cut short, and 'vacant possession' is a promise the vendor has to be able to keep on settlement day — 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 that the property is sold with vacant possession, no tenant or other party will be occupying the premises once settlement is completed, and the Buyer is free to rent out or move into the property. Vacant possession does not necessarily mean the property must be cleared of all debris; it means the property does not have anyone living inside. If you require the property to be in a perfectly clean state on settlement, you'll need to negotiate for the property to be professionally cleaned at the Seller's own cost prior to signing, and this must be added as an additional special condition.
Sold subject to a lease
If the contract of sale is subject to lease, any tenant occupying the premises remains after settlement completes, continuing to pay rent to the new owner. The new owner cannot move in until the tenancy agreement period ends or the tenancy is lawfully terminated. All terms in the tenancy agreement apply to you from the settlement date onwards. If you're looking to move in soon after settlement, you'd need to discuss with the Seller whether, and when, vacant possession can be given, otherwise, as it stands, you won't be entitled to receive vacant possession on settlement.
Fixed-term vs periodic tenancies in Victoria
In Victoria, selling a property does not end a tenancy early. If the tenant is on a fixed-term agreement, they generally have the right to stay until the fixed term ends — a sale does not cut it short. If the tenancy is periodic, ending it so the property can be handed over with vacant possession requires a formal notice to vacate on the prescribed form, with the statutory minimum notice period. Victoria's residential tenancy rules were substantially reformed in recent years, so the exact notice period and the current form should be confirmed with your conveyancer and counted back from your intended settlement date. The practical trap is a short settlement on a vacant-possession contract when the 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 in Victoria, rent and bond are dealt with 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 that you hold it as the new rental provider through Victoria's bond authority. Your conveyancer builds these into the settlement adjustments. See common settlement adjustments for how rent and other items are apportioned. If the property is in an owners corporation, also check the owners corporation position.