What is Vacant Possession?

7 September, 2023 | Jennifer Edwards

Vacant possession refers to the state of a property when it is unoccupied and free of any occupants or their possessions. In other words, vacant possession means the previous owner, or their tenant must have fully moved out of the property and taken all of their personal belongings and rubbish with them either on or before the settlement date so that the purchaser of the property can take possession, move in unobstructed and be occupied and enjoyed by the purchaser.  Settlement cannot take place until the property is vacant.

Why is Vacant Possession Important?
For buyers, vacant possession is crucial because it ensures that they can take immediate possession of the property after settlement. This is especially important for buyers who are purchasing a property to live in, as they will need to move in as soon as possible. If a property is not sold with vacant possession, the buyer may have to wait for the current occupants to vacate the property before they can move in. This can cause delays and inconvenience, particularly if the buyer has already given notice to their current landlord or has made other arrangements based on the settlement date.

For sellers, selling a property with vacant possession can make the transaction more attractive to potential buyers. It shows that the seller is ready to vacate the property and allows the buyer to take possession of the property without any delays. Additionally, selling a property with vacant possession can help to avoid any disputes that may arise if the seller leaves any personal belongings in the property.

Ensuring your agreement for sale and purchase provides for vacant possession
The clause relating to vacant possession is typically found in the Agreement for Sale and Purchase in clause 3.1, page 4.

“Unless particulars of tenancy are included in this agreement, the property is sold with vacant possession and vendor shall so yield the property on the settlement date.”

If the buyer requires vacant possession, it is important to ensure that this is clearly stated in the agreement and that the seller is aware of this requirement. This will help to avoid any confusion or disputes later on in the transaction. It is recommended that both parties seek legal advice before signing the Agreement for Sale and Purchase to ensure that they fully understand the terms and conditions of the transaction.

What if there is a tenant?
Notice needs to have been given to the tenant to ensure that their rental tenancy will have legally ended prior to settlement day. Landlords looking to sell tenanted property will need to ensure they give the correct amount of legal notice for the tenancy to end.

In some cases, a buyer may agree to purchase a property with “subject to tenancy” or “subject to lease” conditions. This means that the buyer is willing to purchase the property with the current tenant or occupant still in place. In this scenario, the buyer will take over the existing tenancy or lease and will become the landlord or lessor. This is different from buying a property with vacant possession, as the buyer will not be able to move into the property immediately.

If the property is not sold with vacant possession and the tenants are not going to be moving out before settlement day, the purchasers will become landlords (even temporarily) and will need to ensure they are meeting their legal obligations as residential landlords.

How is Vacant Possession Achieved?
To achieve vacant possession, the seller must ensure that the property is completely empty by the settlement date. This includes removing all personal items and ensuring that any rubbish or debris is cleared from the property. It is also important to ensure that any tenants or occupants have vacated the property before the settlement date. It is the vendor’s responsibility as landlord to ensure the tenants do vacate in time.

It is important to note that vacant possession does not mean that the property must be in pristine condition. Minor wear and tear or damage caused by the seller’s removal of their belongings is acceptable, as long as it does not affect the buyer’s ability to move in. 

What time on settlement day does vacant possession have to be provided?
Vacant possession needs to be provided at the time the settlement is completed, this means the sale cannot go through until the vendors confirm to their lawyer that they are ready to settle and provide vacant possession.

When vendors or tenants are moving out on settlement day, this can cause delays. Vendors should attempt to vacate the property as soon as possible as the purchasers usually want to move in as early in the day as possible.

Settlement needs to be completed by 4:00pm on the day of settlement to not incur penalty late fees. As settlement cannot take place until the property is vacated, vendors also need to ensure they allow enough time for both parties lawyers to complete the legal process of settlement once they have informed their lawyer that the property is vacant, and they are ready to settle. 

Failure to provide vacant possession on settlement day
If the vendor fails to provide vacant possession on settlement day the purchaser may be able to delay settlement, and/or hold back money and may also be entitled to compensation.

Rubbish left underneath and around the property generally does not prevent a vendor from giving vacant possession, however a purchaser may request a retention of funds be held by one of the lawyers until all of the previous owners’ belongings and all rubbish left by the vendor or their tenant is removed from the property.

From the fine print to the final steps, Jennifer is your partner in securing a seamless property transaction. Don’t let confusion or oversight hamper your plans, navigating the clauses and agreements requires precision. Call Jennifer today to ensure your property aspirations become your reality.

A smooth property transaction can be the difference between a dream come true and a costly nightmare. With stakes this high, expert advice isn’t just beneficial—it’s imperative. Jennifer Edwards’ vast experience as a property law expert offers you the clarity and direction needed to help you buy or sell with ease. For peace of mind and a successful deal, contact Jennifer today.

Jennifer Edwards
jennifer.edwards@smithpartners.co.nz
+64 9 837 6889