Buying a Property With Tenants Already In It

Buying a Canterbury property with tenants in place is common in the investment property market. It means inheriting both the income stream and the legal obligations of the existing landlord. Here is what buyers need to understand before purchasing a tenanted property.

The Tenancy Transfers With the Property

When you purchase a tenanted Canterbury property, you do not get a fresh start with the tenancy relationship. The existing tenancy agreement transfers to you as the new owner. You take on all of the rights and obligations of the previous landlord under the Residential Tenancies Act, including: the agreed rent amount; the existing tenancy terms and conditions; any existing arrears or issues (though the vendor should resolve these before settlement); the bond held with Tenancy Services; and the requirement to meet all Healthy Homes Standards compliance obligations.

Periodic vs Fixed Term Tenancies

The type of tenancy affects your flexibility as the new owner. For periodic tenancies, you can give 90 days notice to vacate if you require the property for your own occupation or for significant renovation. For fixed term tenancies, you cannot end the tenancy early - it runs until the fixed term expiry regardless of your intentions for the property. Before purchasing, understand whether the existing tenancy is periodic or fixed term, and when any fixed term expires.

What to Check About the Existing Tenancy

Before going unconditional, obtain and review: the current tenancy agreement; rent payment history and any arrears; correspondence history between the current landlord and tenant; Tenancy Tribunal history if any; Healthy Homes compliance status and documentation; and the condition of the property at the current tenant's entry date (the ingoing inspection report). A long-term tenant who has been paying rent reliably and maintaining the property well is a genuine asset. A tenancy with arrears history, disputes, or compliance issues needs to be assessed carefully.

Rent Reviews

Under the Residential Tenancies Act, rent can only be increased once every 12 months and must be in line with market rent. If the existing rent is significantly below market, you can give notice of a rent increase at the appropriate time, but you cannot immediately reset to market rent at settlement.

Information from tenancy.govt.nz and the Residential Tenancies Act. For general information only - always obtain independent legal advice before purchasing a tenanted Canterbury property.