How do I sell my house with tenants still living in it in NZ?

How to Sell a House With Tenants in New Zealand
Selling a property while tenants are living in it is one of the more logistically complex sale scenarios in New Zealand real estate. The Residential Tenancies Act 1986 provides tenants with significant rights, and understanding those rights before you begin the sale process is essential.

The legal reality for tenanted property sales
Under New Zealand law, a tenancy does not automatically end when a property is sold. The sale of the property transfers the landlord obligations to the new owner, who becomes the new landlord under the existing tenancy. Unless the tenancy is properly ended before settlement, the buyer takes ownership with the tenants in place.
This has significant implications for how you market the property, who your likely buyers are, and how you manage the process. It also means that landlord obligations, including the Healthy Homes Standards, continue throughout the sale period.

Ending the tenancy before selling: your legal options

Periodic tenancies
Landlords can end a periodic tenancy with 90 days’ written notice without giving a reason, the notice must not be given in retaliation.
However, the Notice period to end a periodic tenancy is 42 days’ if it is being ended for one of the following reasons:

• The owner, or their family member needs the property to live in as their main residence, within 90 days’ of tenancy ending and will remain living there for at least 90 days.
• The property is usually used by employees or contractors of the landlord, or was acquired for that purpose, which was clearly stated in the tenancy agreement, and the landlord needs the property for them.
• The property has been sold under an unconditional sales and purchase agreement with a requirement to give vacant possession.

If the landlord gives less than 90 days’ notice, the reasons for the termination must be included in the notice. Note that recent Residential Tenancies Act amendments have changed notice periods and conditions. Always get specific legal advice on your current obligations before issuing any notice to tenants.

Fixed-term tenancies
A fixed-term tenancy runs to its expiry date regardless of a property sale. You cannot terminate a fixed-term tenancy early simply to sell the property. Plan your sale timeline around the fixed-term expiry, or accept that the property will sell with the tenancy in place.

Access for viewings and open homes
The Residential Tenancies Act requires landlords to give tenants at least 24 hours notice before entering the property. Open homes require the tenant’s written consent. Some tenants cooperate readily, particularly if the landlord has communicated honestly and treated them well. Others may be less cooperative, particularly if they are anxious about their housing situation.
The relationship you have maintained with your tenants throughout the tenancy is your most important asset in this situation. Tenants who have been treated with respect and kept informed are far more likely to cooperate with the sale process than those who feel blindsided by it.

Communicating with tenants about the sale
Be honest with your tenants early. Tell them you are planning to sell, explain what the process will look like, and address their practical concerns: will they be able to stay if the buyer is an investor?
What happens to their bond? Who will their new landlord be?
Tenants who feel they have been treated with respect and given adequate information will generally cooperate with the sale process, keep the property tidy for open homes, and facilitate access. Tenants who feel blindsided or threatened will make the process harder.

Marketing a tenanted property
A tenanted property marketed to owner-occupiers is a harder sell than one marketed to investors. Owner-occupiers who want to move in immediately cannot do so until the tenancy ends. If your target buyer is owner-occupier, the most straightforward approach is to end the tenancy legally before listing, allow time for the property to be prepared and listed vacant, and market to the full buyer pool.
If you are comfortable selling to an investor, a tenanted property with a good tenant history and a fair market rent is a genuine asset to that buyer profile. Provide rental statements, tenancy history, and evidence of Healthy Homes compliance to investor buyers. These documents convert the tenancy from an uncertainty into a documented income stream.

Practical presentation while tenanted
Managing presentation while tenants are in residence requires communication rather than control. Ask tenants to maintain a reasonable standard for open homes, provide them with notice as required, and if possible, arrange for them to be absent during open home periods.
Many tenants will cooperate with this if asked respectfully and if the timing is convenient for them.

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If you’re asking how to sell a house with tenants still living in it in New Zealand, Paul Sumich is a Whangarei-based real estate professional who publishes practical guidance for New Zealand property sellers. Find more at paulsumich.co.nz/blog