Confusion permeates the real estate industry regarding when the term “vacant possession” and “subject to tenancy” should be used. The confusion has arisen because of the vacant possession requirements of the Residential Tenancies Act 2010 (RTA) requiring the contract to specify “vacant possession” in order to obtain the 30 day termination period. Many agents have been told to mark “vacant possession” on their Agency Agreements where a tenant is still resident, but is on a continuing tenancy agreement. Let’s deal with the Agency Agreement process first: In signing up an Agency Agreement, most of the standard form Agency Agreements permit you to mark a box which indicates “vacant possession” or “subject to tenancy”. It is obvious that, if the tenant is in a fixed term period, “subject to tenancy” must be marked.
So…….what happens when it is in a continuing agency period? Section 55 of the Property, Stock and Business Agents Act 2002 (PSBAA) requires that for an agent to be entitled to obtain their commission they must comply with all Regulations. Schedule A of the Regulations require an agent to provide an inspection report at the same time as serving an Agency Agreement on a vendor. An inspection report is an issue of fact, that is, what is in existence at the present time. The issue of “vacant possession” and “subject to tenancy” is one of those issues which must be inserted into an inspection report.
Although a tenant is under a continuing tenancy agreement, they are still a tenant at law. Whilstever a tenant has the right to exclusive occupancy, they have a lease and therefore a right to tenancy. Therefore, it is important that on an Agency Agreement, “subject to tenancy” is used when a tenant is still in residence.
It seems foolish that this would not be done! A prospective purchaser should always be given the option of retaining the tenant or taking vacant possession. The fact that an Agency Agreement indicates “subject to tenancy” does not mean that the contract cannot be altered to provide “vacant possession”.
Now turning to the contract; when it is first issued to the agent, if a tenant is in residence, a lease must be attached to the Contract for Sale. This is a prescribed disclosure document under the Conveyancing Act 1919. As a purchasers solicitor, I would also like to have a look at the lease to ensure that the tenancy has lapsed and that a 30 day notice may be issued if my client wanted vacant possession. The Contract should not be ticked whether it is vacant passion or subject to tenancy. This is an issue that should be left open to negotiation between vendor and purchaser.
Cheers,
Bailey Compton
