Buying a tenanted property in NSW: what to check

When you buy a NSW property that has a tenant, the lease usually comes with it: you become the landlord, the tenant stays on the same terms, and the bond moves to your name. If you want to move in, the contract must say the sale is with vacant possession, and the seller has to end the tenancy properly before settlement. Check which one you're buying before you sign, because the front page of the contract decides it. It's one of the things to check in our due diligence checklist.

Vacant possession or subject to tenancy

The front page of a NSW contract for sale has two boxes: vacant possession and subject to existing tenancies. One of them is ticked.

• Vacant possession means the seller must hand over the property empty at settlement. Ending the lease is their job.
• Subject to existing tenancies means the tenant stays. You take over the lease as the new landlord.

If you plan to live in the property, a "subject to tenancies" contract is a big risk. Ask your solicitor whether it can be changed to vacant possession before you exchange, and how the timing would work.

What to ask for before you sign

A contract sold with a tenant should come with the lease. If it isn't attached, ask the agent for it. You need to know:

• The rent and how often it's paid
• The end date of any fixed term, and whether it has become a periodic (month-to-month) lease
• The bond amount and that it's lodged with NSW Fair Trading
• Rent arrears or disputes, including any tribunal (NCAT) matters
• The condition report from the start of the tenancy, which protects you at the end of it
• Who manages it, and whether the managing agent will keep working for you

Ending a tenancy so you can move in

Since 19 May 2025, NSW landlords need a valid reason to end a lease, and sale is one of them. For a sale with vacant possession, the seller gives the tenant written notice with the reason and supporting evidence. Legal Aid NSW lists 30 days' notice for the sale of premises.

The timing matters. If notice isn't given correctly, or the tenant doesn't leave by settlement, you could end up with a delayed settlement or a tenant you didn't plan for. Ask your solicitor to confirm that the notice has been given properly and that the contract protects you if the property isn't empty on the day.

Buying it as an investment

If you want the tenant to stay, a lease already in place means rent from day one. Before you sign:

• Compare the rent with similar properties nearby, because the rent you inherit is the rent you have until it can be reviewed
• Check the rent is paid up to date. Unpaid rent before settlement is usually the seller's, but your contract decides how it's handled
• Read the lease for anything unusual, such as special terms, included furniture or a right to renew
• Line up insurance from settlement, including landlord insurance if you want it

How the bond moves

The bond stays lodged with NSW Fair Trading and is transferred to the new landlord. The seller and buyer (or their agents) arrange the transfer, and the tenant doesn't pay a new bond. Make sure the transfer is part of the settlement arrangements.

Apartments with a tenant

For a strata apartment, the strata roll records whether the lot is leased. A strata report showing a tenant on the roll, when the contract says vacant possession, is worth asking about before you exchange.

Questions

Can I cancel the lease when I buy?

Not just because you bought the property. The lease continues under its own terms. If you want vacant possession, the contract needs to say so, and the seller ends the tenancy before settlement.

Who pays the rent between exchange and settlement?

The seller keeps the rent up to settlement and you receive it after. Prepaid rent is adjusted at settlement, the same as rates and levies.

What if the tenant won't leave by settlement?

Your rights depend on the contract. If it says vacant possession and the property isn't empty, you can raise it before settling. Talk to your solicitor straight away, before you complete.

Do I need a new lease with the tenant?

No. You take over the existing one. You can agree on a new lease later, within the tenancy rules.

Keep reading

• First home buyer checklist for NSW
• What to look out for when buying a property in NSW
• Property due diligence in NSW: the full checklist
• NSW cooling-off period and 66W certificate

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