When landlords sell: part 1

It's only just August, but the thoughts of many a speculator-landlord now turn towards spring – the traditional peak season for selling properties. Their tenants, however, might find themselves in for a long winter of discontent.

(Selling agents. Grr.)

In a short series of posts, the Brown Couch will look at what you can do if your landlord decides to sell – particularly with reference to new provisions of the Residential Tenancies Act 2010 that have changed the law in significant ways. [UPDATE: see also part 2 and part 3.]

First: what you're entitled to know about your landlord's plans for selling the place.

Disclosure prior to entering into a tenancy agreement.
Since the new Act commenced on 31 January this year, landlords and agents are required to disclose, before entering into a tenancy agreement with you, if they intend to sell the premises (s 26). 'Intend' in this context means that the landlord has gone as far as preparing a contract for the sale of the premises (so they don't have to disclose if they are only vaguely entertaining the possibility of selling).

So what happens if nothing was disclosed, you signed a tenancy agreement, and now you find out that the landlord is putting the place on the market?

If the landlord or agent has breached the requirement at s 26 – that is, they really had prepared a sale contract, and did not disclose the fact – they can be prosecuted and fined: maximum penalty $2200. But if there was no sale contract before the tenancy started, there's no breach – and as a tenant, you probably won't be in a position to tell if your landlord has done the wrong thing or not. Best to get in touch with NSW Fair Trading and let it make some investigations.

And keep in mind, too, that the disclosure requirement has been effective since 31 January 2011 only. The new Act is not a time machine (that is to say, it is not retrospective legislation), so a landlord's failure to disclose prior to 31 January is not now an offence.

In any event, s 26 does not stop a landlord from putting the premises on the market. Nor does having a fixed term agreement stop a landlord from selling. (You might have thought that a fixed term agreement means that your landlord agrees to be your landlord for the duration of the term – but no.) We'll come back to some special provisions relating to fixed terms in a moment.

Notice that the landlord is selling.
Apart from the pre-agreement disclosure requirement, your landlord is required to give you written notice of their intention to sell (s 53). They have to do this at least 14 days before showing the premises to any prospective purchasers.

In this 14-day period, you'll probably ponder your options: should I stay or go? We'll consider the implications of staying put in a subsequent post; here, we'll look at going.

I want to go (and am in a fixed term agreement).
You can go – you just need to give 14 days' notice on the ground that you've been notified that the landlord intends to sell the premises. This is a new ground of termination, at s 100(1)(c) of the new Act, and, with one exception, it is available in relation to all fixed term agreements (that is to say, it's available regardless of whether the agreement started before or after commencement of the new Act and, as discussed previously by NC, regardless of whether the landlord formed their intention to sell before or after entering into the tenancy agreement). The sole proviso: you cannot use it if you knew the premises were for sale when you entered into the tenancy agreement.

All of which, really, is fair enough: the landlord can still choose to sell, but you don't have to live with all the consequences of their choice. (Mind you, we think it would be fairer if you could get compensated for your moving costs, but as it is, you just get to end your tenancy without further liability to the landlord.)

I want to go (and am in a periodic agreement).
You can go – but you cannot give a 14-day termination notice per s 100(1)(c), because these apply only to fixed agreements. You'll have to give a 21-day termination notice, per s 97. (This is the standard no-grounds termination notice.)

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Next: so you've decided to stay put – you'll need to deal with access by the landlord and agent (possibly agents, plural) and prospective purchasers (possibly very plural).