Real estate agents’ key role in vacant possession and smooth settlements

19 October, 2019 | Wade Hansen

Real estate agents, vendors, lawyers and even tenants all have a role to play in ensuring purchasers can take possession of houses without fuss on settlement day.

Vendors generally know they have to provide vacant possession on settlement day, and most do. Vacant possession can’t be achieved in perhaps two percent of the cases we handle, but it causes major stress for all parties.

If the purchaser can’t take vacant possession they are not obliged to settle on the agreed day, and this may result in significant financial loss for the vendor.

Identifying and resolving any potential issues before settlement day is a lot easier, cheaper and less stressful than trying to sort things out afterwards.

Common problems

The common problems that arise are:

• chattels that don’t work as they did when first seen; 
• owners still in the house; 
• tenants who have not moved out; and
• rubbish still on the property (and other issues of tidiness and cleanliness).

The agent’s role

There is no legal obligation on the part of the agent to ensure the property is vacant on settlement day. However communication and good management by the agent can do a lot to avoid bad outcomes.  And when the deal goes through smoothly that reflects well on you as the agent.

The key for agents is to be alert to possible danger signals and facilitate communication between all parties.

For instance, relationship breakups leading to the sale of property can easily cause problems, particularly if the breakup isn’t amicable, or if the parties aren’t communicating much.

Agents can help this process by:

• making sure that the vendors are well aware of their obligations to leave the property by the due date.
• checking that the vendors have given any tenants notice, and that this runs out on or before settlement date.
• ensuring that the vendors know that they have an obligation to leave the property in a tidy state and with the chattels in proper working order.
• advising lawyers about any potential problems that may arise, well before settlement date

Recent experiences

Where there are tenants in a property, it’s up to the vendor to give the tenants the 42 days’ notice they are entitled to, and to make sure the tenants have gone by settlement day.

We had a case recently where notice wasn’t given. The tenants were still on the property on settlement day and the purchasers couldn’t move in.

Settlement was delayed and the vendors had to compensate the purchasers for the cost of the delay. It was upsetting all round.

In another case where Smith Partners were acting for the vendor, there were old cars and machinery to be removed.  This problem was exacerbated by a relationship split where one party was preventing the other from entering the property to remove the items.  This resulted in the property settling 10 days late, and the vendor incurring penalty interest during that period.

Further protection for purchasers

If vacant possession is identified as a potential issue prior to signing the sale and purchase agreement, additional clauses can be added for further clarification and protection.

For example, if there are old cars on the property and it is not possible to remove them before settlement date, some money can be held back from the settlement.

A deadline for removal can be agreed, and the money paid when the cars are removed. If that doesn’t happen, the agreement can provide that the money held back can be used to pay for the removal, and the balance can then paid over.

If you would like to discuss vacant possession, or any matters related to buying and selling residential property, please contact Property Partner, Wade Hansen on 09 837 6885 or at wade.hansen@smithpartners.co.nz