ARE YOU RENTING BACK YOUR NEW PROPERTY TO THE SELLER AFTER SETTLEMENT?
As part of the contract negotiations, you may have agreed to let the seller rent back the property for a period of time following settlement. How this arrangement is formalised will depend on how long the seller will rent back the property.
28 DAYS OR LESS
For a rent back of 28 days or less, the agreement can be formalised by way of a licence agreement. Often the terms of this licence will be set out in the sale contract and provides, at a high level, the rights and obligations of the parties.
GREATER THAN 28 DAYS
Any rent back longer than 28 days will automatically be considered a periodic tenancy under the Residential Tenancies and Rooming Accommodation Act. Under a periodic tenancy, a landlord no longer has a right to terminate without grounds. As such, to terminate the periodic tenancy with the seller, you would need to point to a specific right of termination (e.g. moving into the property as an owner occupier) and then serve the appropriate notice period (depending on the reason for termination, this is often two months).
Accordingly, if you are contemplating a rent back of longer than 28 days, it is preferable to enter into a short fixed term tenancy to give all parties more certainty.
SHOULD THE CONTRACT REFERENCE THE LEASE BACK?
Whether you are entering into a licence agreement or a short tenancy agreement, we recommend including a special condition in your contract to this effect.
TRANSFER DUTY IMPLICATIONS
You should also consider any potential transfer duty implications associated with a rent back e.g. if the seller will be renting back the property for longer than six months, you will not be eligible for the home transfer duty concession even if you will be moving into the property after the seller vacates.
