Tenanted Property - Notice Periods
BY CONNIE MCKEE from www.reiq.com
When selling tenanted property, the first step for any sales consultant is to find out the type of tenancy agreement currently in place. There are two types of residential tenancy agreements in Queensland:
• fixed term, has a definite commencement date and expirationdate, most commonly being for a six or 12 month period.
• periodic tenancyhas a definite commencement date but no expiration date.
A fixed-term tenancy means both parties are contractually bound to the tenancy until the end of the agreement.
A periodic tenancy is generally formed when a new fixed term agreement is not entered into and the lessor/agent or tenant have not given notice to end the Fixed Term tenancy.Basically what this means is if a fixed term agreement ends on the 1/4/19 if either party has not taken action to end the agreement, it “rolls over” to a periodic tenancy on the 2/4/19.
The difference between the two lies mostly in the different requirements for notice of termination by either party as contained in the RTRA Act.
Fixed term - Should either party wish to end a tenancy at theexpiry of the fixed term, the following notice periods apply;
• The lessor/agent must give the tenant two months Notice to Leave without grounds, by issuing the RTA Form 12. This is two calendar months, not 60 days.
• The tenant must give the lessor/agent 14 days written notice without grounds by issuing the RTA Form 13.
In both of these cases (without grounds), the hand-over date must be on or later than the expiry date of the agreement.
• The lessor/agent is to give tenants two months’ Notice to Leave without grounds by issuing the RTA Form 12. This is two calendar months, not 60 days.
• four weeks notice for a sale contract.
- Section 286 (1) RTRA Act The lessor under a periodic agreement may give a Notice to Leave the premises to the tenant because the lessor has entered into a contract to sell the premises with vacant possession. (2) A Notice to Leave under this section is called a notice to sale for sale contract. The lessor/agent must issue the RTA Form 12 with grounds, due to a sale contract.
• Tenants are to give lessor/agent 14 days’ Notice of intention to leave without grounds by issuing the Form 13.
What happens if a fixed term agreement is about to expireand the lessor/agent and tenant have not entered into a newfixed term agreement and a Contract of Sale is entered into,what would the notice period be?
The consideration here is when the Form 12 is issued. If thetenancy is a fixed term when the Form 12 is issued then thenotice period is two months.
If the Form 12 is issued and the tenancy agreement is a periodic agreement, then it is four weeks notice.
Generally a lessor will not want a Form 12 issued to the tenants until the Contract of Sale is unconditional. Sales consultants need to factor these dates into any calculation associated with the applicable notice period for a tenant and the settlement date should a buyer require vacant possession and the type of tenancy agreement would allow for this.
Extract of RTRA Act
286Notice to Leave if premises being sold
(1) The lessor under a periodic agreement may give a Notice to Leave the premises to the tenant because the lessor has entered into a contract to sell the premises with vacant possession.
(2) A Notice to Leave under this section is called a Notice to Leave for sale contract.
See sections 329(2)(f) and 330(2)(f) for requirements about the handover day for a Notice to Leave given because of a sale contract.
Calculating the notice period
Notice periods in the RTRA Act identify the minimum times required. The notice periods are expressed in months (calendar, days, weeks and hours). The Acts Interpretation Act 1954 is
the overriding legislation, which provides direction on how to interpret time periods and deliver notices. Time periods for serving notices are expressed as ‘clear days’ between the day of serving the notice and the day for taking the next action. This means when you calculate the dates on the notices to allow the correct time, you must not count the day the notice is received, you can start counting from the following day and the expiry of the notice is at midnight on the stated day. The start and end of the notice period should fall on a business day. For example if a notice was hand delivered on a Friday, start the notice period from the next business day, Monday. Factor in weekends and public holidays when considering non-business days.
Also, you need to factor in the method of issue. If a notice is hand delivered to the letterbox or is emailed, the calculation of the notice period would commence from the following business day. If however a notice was posted by standard mail, you would need to allow six standard business days for the notice to arrive to the letterbox and you would then start calculating the notice from the following business day.
When a seller requests a sales appraisal of residential rental property the agent should ask the client to provide the following information.
• A copy of the current Form 18a General Tenancy Agreement.
- Check if the tenancy is fixed term or periodic. If the tenancy is periodic ask the seller to confirm in writing that there hasbeen no other verbal or written agreement entered into by property manager on their behalf.
- When reviewing the General Tenancy Agreement be mindful of section 307 of the RTRA Act. It sets out provisions which give the tenant the ability to end a tenancy by giving at least two weeks notice, if the premises are advertised for sale, and/orbuyers are shown through in the first two months of a tenancy.This includes including renewals. Most sellers/lessors are reliant on the rental income and may review the timing of their decision to sell the property to avoid the potential risk of termination.
RTRA Act Section 307 Notice of intention to leave if premises being sold
(1) The tenant may give notice of intention to leave the premises to the lessor or lessor’s agent if either of the following happen within 2 months (the prescribed period) after the start of the agreement--
(a) the premises are advertised for sale;
(b) the lessor or lessor’s agent enters the premises under section 192(1)(f) to show the premises to a prospective buyer.
(2) However, subsection (1) does not apply if the lessor gave the tenant written notice of the lessor’s intention to sell the premises before the agreement was entered into.
(3) A notice of intention to leave under this section must be given not later than 2 weeks after the end of the prescribed period.
(4) A notice of intention to leave under subsection (1) is called a notice of intention to leave for intention to sell.
If you are considering selling your tenanted investment property give Sandy a call today on 0438 762 163 to discuss your options