Tenanted possession but vendor is taking one tenant to tribunal

[shahil.nazia]

Hi all,
I have a property under contract in Oamaru which consists of 3X2 brms, all let out 110 each. As a condition on the contract, I had asked for tenanted possession. I have just found out from the real estate agent that one of the tenants is in arrears and has given the vendor verbal notice of vacating the property, and that the vendor is taking the tenants to the tribunal.

My problem is that the contract goes unconditional this afternoon, with settlement this friday (24.11). While I am working with my solicitor on this, does anyone have a bright solution that would also work on my favor? I reckon I could knock off a few ks off the price, and im sure i could delay the settlement until the tribunal sorts out the issue, but could I stretch this to get the vendor to look for a tenant for me paying $110? Is this advisable?

cheers,
shahil

[xris]

Hello shahil,

I do not understand what the problem is.

Why are you concerned about a problem that, apparantly, is non-existent?

Could you please elaborate?

xris

[Volatile]

Shahil,

I was under the impression that it was wise to specify vacant possession so that you don't inherite any of the previous problems. The other thing is you don't want the current vendor just letting the property to any old p-fry just to meet their obligation to you, they wont care if its a terriable tenant.

[shahil.nazia]

thanks for the reply

Shahil,

I was under the impression that it was wise to specify vacant possession so that you don't inherite any of the previous problems. The other thing is you don't want the current vendor just letting the property to any old p-fry just to meet their obligation to you, they wont care if its a terriable tenant.

hmm..i was thinking along those lines as well..solicitor is working on knocking off a few ks off the price and delaying settlement till tenant has moved out- but what if she trashes the place prior to settlement? The purchase was unsighted (but the registered valuer donated me 20k and had good feedback) but I reckon it might pay to check out the soon-to-be vacant flat before settlement, rite?

Cheers,
shahil

[shahil.nazia]

elaborate

Hello shahil,

I do not understand what the problem is.

Why are you concerned about a problem that, apparantly, is non-existent?

Could you please elaborate?

xris

problems:
1) oamaru has a higher vacancy period than the high-growth areas, such as Auckland. I am concerned about how long this could actually stretch out to be, despite the flat being in neat condition at the time of registered valuation.
2) what if tenant trashes place befores settlement, how would this be resolved?

~ shahil

[xris]

1) oamaru has a higher vacancy period than the high-growth areas, such as Auckland. I am concerned about how long this could actually stretch out to be, despite the flat being in neat condition at the time of registered valuation.

This has got nothing at all to do with the contract you are bound to.

2) what if tenant trashes place befores settlement, how would this be resolved?

Ask the re agent or your lawyer. You do have certain rights in this respect. However, 'what if's' are pointless pondering on.

..................

And to be a little blunt, why do you seem to think that you have a right to 'knock a few k's off the price'? You have freely entered into a binding contract and you are bound by it. Some people might consider it unwise to take on a property with an existing tenency in place, and also unwise, if not foolish, to buy a property sight unseen in a back water like omarama. But that was your choice. On the positive side, next time you will be more aware of what the s&p agreement says and what you are letting yourself in for. Property is a never ending learning curve.

xris

[BusyLizzy]

I would push for a vacant possession and later settlement (to allow for correct notice period to tenant) It's probably to late for that now, of course - but consider it for next time.

That gives you the opportunity to undertake the required credit/reference checks on the existing tenants. If you consider them suitable by YOUR standards, then you can sign them up again. If they are NOT suitable, then you find new tenants, hopefully by possession date. If not, you have vacancy for a few weeks. Better that than taking on someone else's problem.

Good luck!

[shahil.nazia]

Thanks guys!

[SuperDad]

What has happened with this one Shahil?

Did you confirm unconditional today?

Paul.

[xris]

Shahil,

The best constructive advice I can give is that you...

1/ Ask nicely for a longer settlement and if the vendor would agree to alter the contract so you have vacant possession.

2/ Go down and engage a property manager.

3/ Chances are the vendor will not agree to any of this so you are stuck with what you have got. You take on the tenancies, warts and all. It may not be that bad though.

4/ You would be foolish not to go down and do a final inspection. This should be on the morning of settlement before you tell your lawyer to settle. You are in a weak position because you bought site unseen, so you will only have the S&P to guide you (eg if the curtains are torn and the vendor says they were torn when you made your offer what can you do?- not much). You do have some rights though in the vendor's warranties in the contract. I suggest you read them.

4/ You normally would have no rights to view the property post confirmation but prior to settlement, except for the final inspection. A sensible vendor would not allow you an early viewing, although the vendor has no control over if the tenants let you in. However, if the vendor learns about this that might be seen as your final inspection.

5/ So, I suggest going down a coupl of days before settlement, engaging a property manager, doing the final inspection, meeting the tenants and seeing to any initial maintenance (which could be major of course), and then travel back.

6/ You might want to consider putting it straight back on the market - discuss with a local agent.

Moral - be very wary of buying out-of-town; and buying site unseen; and learn the contract terms.

xris

[Glenn]

Well my 2 cents worth.

The purchasor is committed to buying the property with tenants in place. Good bad or what ever.
On settlement the new owner becomes their landlord.
The debt owed to the old landlord stays that. That being a debt for the old landlord to pursue and collect.
Any money coming in from now on becomes the new owners. The bad tenant has given notice so that presumably will occur not later than two weeks out from purchase. If the tenant does not vacate then the new owner needs to seek a possession order.
The new owner needs to make sure all of the bonds are transfered to his name. If the lawyer is any good they should have sorted this. This is done by getting the vendor to sign a change of landlord form. At the very least the real estate agent or the vendors lawyer should have arranged for all three tenancy agreements and all three bond records to be given to the purchasor. Now if as is very common the agents and the lawyers have not done a complete job then the purchasor can send proof of purchase off to the bond centre and get all the three bonds across to the new owner.
Now It is important for the purchasor to get the bad tenants bond rather than the old owner in order to cover the clean up costs and any rent owed post purchase.

Actually going off on a tangent it is about time the REINZ sharpened up their act and got principles of RE firms to be more conversant with the RTA. There should be no sale and purchase with tenancies in place without the tenancy agreement and bond details attached to the sale and purchase agreement.
Buying a property with tenancy in place is the purchase of both a property and an interest in a lease. How on earth can any purchasor buy something like a lease that is not clearly defined.

[Re@der]

Shahil
Over a few years of managing my own properties I have come to the view that turnover of tenants is not to be feared but rather a learning experience of what your customers value and are prepared to pay for.

Directly opposed to Commercial sites, residential properties are valued according to the benefits you have to offer tenants rather than how profitable or any other internal elements a commerical tenant may have.
Advice for your case: move on to the next tenant, you may get a rent increase.

[shahil.nazia]

Hi Guys,
Just an update - the tribunal decided in favor of landlord and ordered the tenant to evict immediately, otherwise landlord had right to immediate possession. Flat was let out for 2 weeks with LJ Hooker. At first there were no bites, and then BINGO - first person through the property takes it up and also comes with good references. While it was a stressful 2 weeks for me, in hindsight I probably should have exercised greater patience - as they say, vacancy is only a cost-of-business.

cheers for all your support,
shahil

[Jumpin]

problems:
1) oamaru has a higher vacancy period than the high-growth areas, ....

.....Some people might consider it unwise to take on a property with an existing tenency in place, and also unwise, if not foolish, to buy a property sight unseen in a back water like omarama.

Well I guess they are both in the South Island