Vacant possession and tenanted property

When you buy a property, one of the first things to establish is whether you will receive vacant possession at settlement or take the property subject to an existing tenancy.

Vacant possession means the seller is required to give you possession of the property at settlement, subject to the contract. Subject to an existing tenancy means the tenant remains and you generally become the landlord after settlement, subject to the tenancy laws and contract that apply.

If you plan to live in the property yourself, this distinction matters before you sign. If you plan to rent it out, the tenancy terms become part of what you are buying.

Key takeaways

• The contract sets the starting point: it should make clear whether vacant possession is required or the property is sold subject to an existing tenancy. The tenancy and applicable state laws decide the rest.
• Tenancy law is state-based: notice periods, ending a tenancy, rent changes and disclosure differ between states, so check the rules where the property is.

1. The two ways a property can be sold

Vacant possession generally means the seller must hand the property over at settlement free of occupants, and without an existing tenancy or other right to occupy it continuing after settlement, so the buyer can take possession. It is about the right to possession, rather than simply whether someone happens to be living there on the day. It does not automatically mean the property will be professionally cleaned or cleared of every item.

If the property is sold subject to an existing tenancy, the buyer generally takes over as landlord and the existing tenancy continues according to its terms and the applicable tenancy laws. The full explanation is in the vacant possession and tenanted property explainer.

State tenancy laws can affect what you can do after settlement, including ending a tenancy, changing rent and dealing with existing notices or agreements. Check the rules that apply in the state where the property is located before you commit.

2. What are you planning to do with the property?

If you want to live there: confirm whether the property will be sold with vacant possession. If there is an existing tenant, do not assume the seller can simply ask them to leave before settlement. Whether and when a tenancy can end depends on the state, the tenancy agreement, the reason for termination and the applicable notice requirements. Establish before signing whether vacant possession can be provided and when.

If you want to rent it out: an existing tenancy may continue after settlement. Before committing, understand the tenancy terms and the rules that apply to you as the new landlord.

3. What to check before you commit

These are the questions that usually matter most, rather than things the law requires everywhere:

• Is the property being sold subject to the existing tenancy?
• What type of tenancy is it?
• When does the current term end?
• What rent is currently being paid?
• Is the rent paid up to date?
• Is there a bond and how is it being dealt with?
• Are there any existing notices, disputes or arrears?
• Are there any agreed repairs or maintenance obligations?
• What happens to the property manager after settlement?
• What rights will you have as the new owner under the relevant state tenancy law?

4. Selling a tenanted property

Decide early whether the sale will be subject to the existing tenancy or with vacant possession. If vacant possession is required, the tenancy may need to be ended in accordance with the relevant state tenancy laws, and those requirements vary between states. Do not promise a buyer vacant possession until you have confirmed that the tenancy can lawfully end in time.

5. How the rules differ by state

The basic distinction is the same across Australia, but the rules governing residential tenancies are state-based. That can affect notice periods, ending a tenancy, rent changes, disclosure and what happens when a property is sold.

Detailed state guides are available for Queensland and Victoria. For a property in another state, check the residential tenancy rules that apply where the property is located.

6. Vacant possession is not the same as ready to move into

Vacant possession does not mean every practical step for moving in has been completed. It means you are entitled to possession under the contract. Utilities, cleaning, rubbish removal and other arrangements may still need to be dealt with separately, starting with utilities at settlement.

7. The question worth asking

The important question isn't simply whether a property has a tenant today. It's whether the property will be available for the purpose you are buying it for when you become the owner. For an owner-occupier that means asking when you can move in, for an investor what tenancy you are taking on, and for a seller whether you can deliver the possession you've promised.

Before you sign, know whether you're buying an empty property or taking on an existing tenancy, and make sure that matches what you intend to do with it. Good conveyancing should make that clear before you commit, not after settlement.

Common questions

What does vacant possession mean when buying a house?

The seller must generally hand the property over at settlement without a tenant or other person who has a continuing right to occupy it, so you can take possession. It is not a promise the property will be cleaned or cleared.

What does buying a property subject to a lease mean?

The existing tenancy continues after settlement and you generally become the landlord, subject to the tenancy agreement and the state tenancy laws that apply.

Can I buy a tenanted property and move in?

Not automatically. Whether and when the tenancy can end depends on the state, the tenancy agreement and the applicable notice requirements, so establish this before you sign.

Does the tenant have to leave when a property is sold?

No. A sale does not by itself end a tenancy, which ends only in the ways allowed by the tenancy agreement and the state tenancy law that applies.

What happens to a tenancy when a property is sold?

Sold subject to the tenancy, it generally continues on its existing terms with the buyer as landlord. Where vacant possession is required, it must end lawfully before settlement under the relevant state rules.

Can I increase the rent after buying a tenanted property?

Rent increases are governed by the tenancy agreement and the state tenancy law that applies, including limits on timing and notice, so check those rules first.

Can I end a tenancy because I want to move into the property?

Some states allow a tenancy to be ended on this ground, on conditions and notice periods that differ, so check the rules where the property is located.