Understanding 'Tenant in Situ': Your Essential Guide to Western Australia Property Contracts
1. Plain English Definition
Tenant in Situ means there is an existing tenant living in the property you are buying at the time of settlement. This clause highlights that the sale includes the current tenancy agreement, meaning the buyer takes over the landlord responsibilities and rights from the seller upon settlement. It’s crucial for buyers to understand that they are inheriting a legal relationship with the tenant, which impacts their immediate access and use of the property.
2. The Danger Zone: Buyer's Risk
- Delayed Possession: You might not be able to move into your new home on settlement day, as the existing tenant has legal rights to occupy the property until their lease expires or is lawfully terminated. This can force you to pay for temporary accommodation or storage, a significant buyer's risk.
- Unexpected Eviction Costs: If you wish to occupy the property, you may need to issue a notice to vacate, subject to the terms of the existing lease and Western Australia's Residential Tenancies Act 1987. Premature termination can lead to compensation claims by the tenant or a lengthy court process if the tenant disputes the notice.
- Inherited Lease Obligations: Under the REIWA Contract, you inherit all terms of the existing tenancy agreement. This includes obligations to maintain the property, manage bond funds, and adhere to rental increases as specified in the lease, potentially limiting your flexibility and immediate plans for the property.
- Property Condition Surprises: While a property inspection is standard, a Tenant in Situ can sometimes make it harder to thoroughly assess the property's condition for hidden damage or maintenance issues that may become your responsibility after settlement.
- Financial Discrepancies: Ensure the seller provides accurate records of rent payments, bond held, and any outstanding arrears. Discrepancies can lead to you inheriting unpaid rent or being liable for bond claims that pre-date your ownership, impacting your cash flow in a Western Australia property contract.
- Limited Renovation Plans: If you plan renovations, the existing tenancy will significantly delay your ability to start work. You cannot commence major works while the tenant resides there, potentially costing you time and increasing overall project expenses.
- Legal Compliance Burden: As the new landlord, you immediately become responsible for complying with all Western Australia landlord-tenant laws. Ignorance of these laws, particularly regarding maintenance, entry, and bond management, can lead to fines or legal action from the tenant.
4. Real-Life Western Australia Scenario
Mei, a Chinese-Australian investor in Perth, purchased an investment property advertised as "Tenant in Situ" through a standard REIWA Contract. She assumed she could immediately increase the rent to market rates after settlement. However, the existing lease, which she hadn't thoroughly reviewed, had another 10 months remaining with a fixed rent amount much lower than market value. Mei faced 10 months of reduced rental income, significantly impacting her initial investment projections and cash flow. The lesson: Always obtain and meticulously review the existing tenancy agreement before signing the offer and acceptance for any Western Australia property contract.