Hi, the S&P is vacant possession, but the tenant still there on settlement date. What will be the consequences for both buyer and seller? How to settle this if buyer insists not taking the tenant?
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My take only and many others may differ...the vendor will be in breach of contract and you may enter into a period of interest chargeable per the sale and purchase agreement. Why would one purchase a property with tenants in it anyway? Vacant possession is the best way to purchase IMHO because you do not want to inherit a tenant, you need to qualify your tenants.http://Www.renopro.nz
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My take only and many others may differ...the vendor will be in breach of contract and you may enter into a period of interest chargeable per the sale and purchase agreement. Why would one purchase a property with tenants in it anyway? Vacant possession is the best way to purchase IMHO because you do not want to inherit a tenant, you need to qualify your tenants.
make sure your lender know so you not end up paying interest on the funds you borrow until you end up settling.
you can charge the seller penalty interest rates, get this well documented with your lawyer.
ask your lawyer to send letter to the vendors lawyer advising that you are expecting vacant possession and that you will not be settling until its vacant. Etc.
if you decide that you may want to keep the tenant then get the following done:
is the propery managed by property manger or the vendor????
seek to view copy of the tenancy agreement and bond lodgment with DBH.
make sure rent is at maket rent.
4 weeks bond is paid.
if the property is managed by the owner then, get YOUR profeshonal property manger to vet the tenant.
If you don't plan to use a propery manager then DON'T do it.New Zealand's #1 Marketplace for Property Investors & Sellers!
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The vendor is usually completely in the wrong, and the purchaser simply sits there claiming penalty interest (less an allowance for not having to draw down a mortgage) until vacant possesion is provided for. If you as purchaser were going to move in and have sold your property then you can claim motel and storage and shifting expenses.
If you were going to tenant it anyway, then you can look at taking on the tenant, but you don't have to.
If you are the vendor, then you're in trouble....you need to get the tenant out if the purchaser doesn't want them. There is NO UPSIDE for you as vendor.
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What if the tenant indicate only to move out on the settlement date itself? If this is the case, should we have the inspection done on the settlement date? But what if tenant still there in the settlement date morning/afternoon?
Should the tenant move out latest by one day before settlement date?
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Good question. I think that as long as the vendor can give notice on the settlement date to the purchaser that vacant possession has become available, and that notice is both given and received prior to 4pm on the date of settlement, the vendor would be ok.
Ideally you want the tenant out at latests one day before settlement date, as you suggest. The problem with having them move out on the settlement date is that your liability to the purchaser is now out of your control....you are relying on the tenant moving out and there is no time to fix things if something goes wrong. And if settlement is a Friday, you've got three days penalty interest. On a $500k property with 12% penalty interest, that's $500 or so...not the end of the world...but if the purchaser ends up requiring storage and motel occupation it can be a lot higher.
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Vacant possession is listed on the agreement. The house has been sold and the previous vendor had tenants in the property while THEY owned it.
It should be up to the vendor to have the tenants out, have the house inspected and any damages fixed by settlement date. If they haven't done so they are in breach of the agreement for vacant possession. Obviously the best thing to do is to delay possession until the previous vendor gets the tenants out and has the house in vacant condition.
Best to speak to your lawyer about how to go about this as there will be a number of days if not weeks to settle this depending on the previous vendors agreement with the tenants.
Consequences for you? later settlement date
Consequences for the seller? many
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