Understanding Tenant in Situ Clauses in your Tasmania Property Contract
Plain English Definition
Tenant in Situ means that the property is being sold with an existing residential tenancy agreement in place, and the buyer will take over the role of the landlord immediately upon settlement. Instead of receiving "vacant possession," you inherit the current occupants, their lease terms, and all legal obligations under the Residential Tenancy Act 1997 (TAS).
The Danger Zone: Buyer's Risk
- Mortgage Reclassification: If you are a first-home buyer applying for an owner-occupier loan, your lender may refuse to fund the purchase if a Tenant in Situ is present, as they often require vacant possession as a condition of the loan.
- Delayed Occupation: You cannot legally force a tenant to move out before their fixed-term lease expires, even if you have signed the Real Estate Contract; you must honour the existing end date regardless of your personal moving plans.
- Bond Transfer Complexity: In Tasmania, rental bonds are managed via the MyBond system; if the seller has not properly managed the bond or if there is a dispute, you may inherit a messy legal situation with the Tasmanian Rental Deposit Authority.
- Inherited Property Damage: When buying with a Tenant in Situ, you may not see the property without the tenant's furniture until months after settlement, making it difficult to claim for damages that occurred prior to you taking ownership.
- Strict Notice Periods: To move into the property yourself, you must provide the tenant with at least 42 days' notice, but this notice can only be served in specific circumstances under the Residential Tenancy Act 1997 and cannot override a fixed-term lease.
- Rental Arrears and Default: There is a significant buyer's risk that the tenant may stop paying rent or cause damage during the settlement period, leaving you to commence costly eviction proceedings in the Tasmanian Civil and Administrative Tribunal (TASCAT) immediately after purchase.
Real-Life Tasmania Scenario
Li, an investor looking at the Hobart market, signed a Real Estate Contract for a Sandy Bay unit with a Tenant in Situ. He assumed he could increase the rent to market rates immediately after settlement, but soon discovered the tenant was on a fixed-term lease with eight months remaining at a significantly discounted rate. Because the lease was legally binding, Li was forced to subsidise the mortgage shortfall out of his own pocket for the remainder of the term. Lesson: Always demand a copy of the fully executed lease agreement and a current rent ledger before signing a Tasmania property contract.