What does “Vacant Possession” mean and what should you expect on settlement of your property?
When acting for a purchaser in property transactions, we are sometimes met with circumstances where rubbish, furniture and other unwanted personal effects are left at the subject property at the time of the scheduled settlement.
This has led to discussions with our clients, real estate agents and solicitors acting for Vendors around what constitutes “vacant possession”. Below is a timely explanation as to what condition you should expect your property will be in when you are due to settle your purchase.
The front page of the 2005 edition of the Contract for the Sale of Land deals with possession that will be provided on settlement. The Contract is either marked “vacant possession” or “subject to existing tenancy”.
If no box is marked, there is a presumption that you will obtain vacant possession on settlement. However, you will not be able to rely on this presumption if it can be shown that you had actual knowledge, prior to entering into the contract that the property was being sold subject to an existing tenancy or occupancy.
Vacant possession includes:
- giving title to the property free from any tenancy or right of occupation; and
- giving physical vacant possession.
The latter obligation requires the Vendor, prior to completion, to remove from the property any goods not included in the sale, unless the Purchaser has consented to them being abandoned or left there permanently. This means that a Vendor will be in breach of an obligation to provide physical vacant possession if large quantities of rubbish are left in the premises, under the premises or in any improvements such as a garage.
However, this should not be mistaken as a contractual obligation on the Vendor to clean up and hand over the premises in a spotless or even reasonably clean condition. To avoid any arguments in relation to removal of rubbish, we suggest that if the garage, sub-floor area or any other area in the property contains any amount of material that you expect to be removed, you instruct us to negotiate the inclusion of a special condition in the Contract, stating that the rubbish will be removed prior to completion.
It is also vital to arrange an inspection of the property on the day of completion to ensure that the premises have been vacated and any goods and rubbish have been removed in compliance with the obligation to provide vacant possession.
Another issue that often arises, is what condition and state of repair the property has to be kept in between exchange and settlement. Many of our clients view properties when they are on the market for sale and, as such, are presented in an impeccable condition only to find that between the period from exchanging contracts to settlement, the Vendors have become relaxed regarding garden and lawn maintenance.
So what are your rights if this happens to you? The Vendor must, between the period of exchange and completion, not damage the property and take reasonable care to preserve it in the condition it was in at the date of the Contract.
This means that the Vendor cannot, after exchanging Contracts, completely abandon interest in and control over the property pending completion. The Vendor is bound to preserve the property and maintain it in a reasonable state of repair having regard to its condition at the date of the Contract.
We recommend that you conduct a number of ‘drive-by’ inspections of the property between the date of exchange and the date of settlement (aside from a formal inspection in the days leading up to settlement) and immediately alert your solicitor to any problems prior to settlement.
We look forward to assisting further with your next purchase or sale.