Buying a property with a tenant already in it: what changes at settlement in Victoria
You have found a townhouse you like in Cranbourne. Then you spot the line in the listing: leased until March next year. So what happens to the tenant, the rent and the bond when you buy?
Here is the short answer. When you are buying a property with a tenant already in it in Victoria, the tenant usually stays. You take on the existing lease, you take over the rent, and the bond record transfers to you. You become the landlord, which the law now calls the rental provider. A change of owner does not, on its own, end a tenant’s right to stay.
This guide explains what carries over, what gets adjusted at settlement, and where buyers get caught out. It is written for investors, and for owner-occupier buyers who find the right home but discover someone already living in it. Conveyancing Today handles settlements across the south-east Melbourne corridor, from Berwick out to Warragul, so these are questions we field often.
You step into the landlord’s shoes
When you buy a tenanted property, you take over the existing tenancy agreement. The lease does not end because the property has been sold. Its terms carry on, and you take on the rights and duties the previous owner had under the Residential Tenancies Act 1997 (Vic).
That means the agreed rent, the end date, any pet permission and any special terms all stay in place. From settlement you collect the rent, adjusted to the day as explained below. You become the rental provider listed on the bond, which the RTBA continues to hold. You take on the repair and compliance duties, including the rental minimum standards where they apply to the tenancy. If the tenant has a fixed-term lease, you are bound by it until it ends.
This is the part many first-time investors miss.
Buying the property does not reset the tenancy. It transfers it.
Should you buy with the tenant in place?
Buying with a tenant has a clear upside: rental income from day one, with no vacancy gap. The trade-off is control. You inherit the agreed rent, which may sit below market and cannot rise until the next 12-month window, plus the lease term and any prior arrangements. If the numbers work at the current rent and the tenant has a good record, that is often fine. If you wanted a quick rent rise or an empty property, look closely first.
What the contract, lease documents and Section 32 should be checked for
Before you sign, you need a clear picture of the tenancy you are taking on. The detail sits mainly in the lease documents and in the contract of sale and its special conditions, not in the vendor’s statement. The vendor’s statement, also called the Section 32 (named after the section of the Sale of Land Act 1962 (Vic) that requires it), covers land and title matters such as mortgages, covenants, easements, zoning and outgoings. It is not where the tenancy particulars sit.
Ask for and check the following:
- The lease itself, including the type (fixed-term or periodic) and the end date.
- The current rent, and the date of the last rent increase.
- The bond amount, and proof it is lodged with the Residential Tenancies Bond Authority (RTBA).
- Any pet approvals, parking arrangements or other special terms.
- Whether there are rent arrears or any current dispute with the tenant.
Do not rely on the Section 32 alone here. Have your conveyancer confirm the lease, the rent ledger and the RTBA bond record before the contract becomes binding. A tenancy you cannot see clearly is a risk you are buying blind.
What changes at settlement when you buy a tenanted property in Victoria
Settlement of a tenanted property runs like any other Victorian settlement, with a few extra parts tied to the tenant. It is usually completed electronically through an electronic lodgment network, commonly PEXA, and the usual adjustments are worked out to the day. Here is what gets handled:
- Rent is adjusted at settlement. Under the usual Victorian contract position, the seller is entitled to rent up to and including settlement day, and you are entitled to it after settlement, unless the contract says otherwise. If rent has been paid in advance, the statement of adjustments should credit you for the part that falls after settlement. This is the rent adjustment at settlement.
- The bond record is transferred to you through the RTBA. The RTBA continues to hold the bond money; what changes is who is listed as the rental provider on it. Consumer Affairs Victoria calls this a rental provider transfer, and it must be started through the RTBA website within 5 days of the change of owner. More on this below, because it is the step buyers most often forget.
- Council rates, water and owners corporation fees are adjusted. These are split between buyer and seller, the same as in any settlement.
What if you want the property vacant instead?
If you want to move in yourself, or want the property empty so you can renovate or re-let, vacant possession has to be sorted out before you sign, not after.
Vacant possession means the property is handed over empty at settlement. The buyer and seller agree to it in the contract, and the seller arranges for the tenant to leave in line with the law. Wanting the tenant out is not the same as being able to require it.
Under the Residential Tenancies Act 1997 (Vic), a rental provider can only end a tenancy for set reasons, and most now carry 90 days’ notice. Since 25 November 2025, the minimum notice for selling the property rose from 60 to 90 days, and a fixed-term lease cannot be cut short for a sale. So if the property is leased for another eight months, an empty handover on a short settlement may not be possible.
A notice does not by itself remove the tenant. Even with a valid notice, vacant possession is not guaranteed unless the tenant leaves, or the rental provider obtains and enforces a possession order through VCAT.
A few points worth knowing:
- The notice to end a tenancy for a sale must be given by the current owner, with evidence such as the signed contract of sale. It is part of selling, not something you action after you own the place.
- If you plan to move in yourself, that is a separate owner-occupation pathway from a sale notice. It generally needs 90 days’ notice with the required evidence, and it cannot be used to end a fixed-term agreement early. There are specific end-of-fixed-term rules where the lease already contains a move-in term, so get advice on the actual lease before relying on this.
- If timing matters, build it into the contract. Your conveyancer can help you set a settlement date that lines up with vacant possession, or advise on buying with the tenant in place.
This is general information, not advice on ending a particular tenancy. For advice on ending a tenancy, timing vacant possession or serving a notice to vacate, speak to a solicitor; your conveyancer handles the conveyancing and contract side. Consumer Affairs Victoria also has guidance.
Where buyers get caught out
Most tenanted purchases are straightforward. Across the corridor’s newer estates in Clyde North, Officer and Cranbourne, plenty of investor stock sells with a tenant already in place. The problems tend to come from a handful of recurring issues. Watch for these:
- Fixed-term versus periodic. A fixed-term lease binds you until its end date. A periodic (month-by-month) lease gives more flexibility, but still needs a valid reason and proper notice to end. Know which one you are buying.
- A bond that was never lodged with the RTBA. If the previous owner held the bond informally, there may be nothing to transfer, and you could be left exposed at the end of the tenancy. Confirm the bond is lodged before settlement.
- Undisclosed side agreements. A verbal deal on rent, a reduced rate, or a private arrangement about the garden or a pet can bind you even if it is not written into the lease. Ask for the tenancy history to be confirmed in writing.
- Rent arrears. If the tenant is behind, that can become your problem. Ask to see the rent ledger.
This is where a careful conveyancer earns their fee. Conveyancing Today is the conveyancing arm of MKA Legal, so if a tenanted purchase turns up something that needs legal advice, like a disputed bond or an unclear side agreement, an associated law firm is on hand.
Vacant possession or tenant in situ: a quick comparison
The table below sets the two outcomes side by side, depending on whether the tenant stays or the property is handed over empty.
| Factor | Tenant stays (in situ) | Vacant possession |
|---|---|---|
| Rent at settlement | Seller entitled up to and including settlement day; you are entitled after settlement, with advance rent adjusted | No rent; the property is handed over empty |
| Bond | Bond record transferred to you through the RTBA; the RTBA holds the money | No bond to transfer |
| Notice to the tenant | Not required; the lease simply continues | The seller must give valid notice, usually 90 days, before settlement |
| Settlement adjustments | Rent, council rates, water and any owners corporation fees | Council rates, water and any owners corporation fees |
| What you can do on day one | Collect the rent; you are now the landlord | Move in, renovate or re-let |
Before you sign: the bond transfer buyers forget
The step that catches buyers out is not at settlement. It is just after it. When ownership changes, the bond record must be updated through the RTBA so you are listed as the rental provider, and Consumer Affairs Victoria says this transfer must be started within 5 days of the change. Miss it and the record may still show the seller when the tenancy ends, which makes sorting out the bond far harder.
So before you sign a contract on a tenanted property, get two things in writing: a copy of the current lease, and proof the bond is lodged with the RTBA. Check they match the rent, bond and term in the contract. If anything does not line up, that is the moment to raise it, while you still can.
Send the contract and the lease to Conveyancing Today before you sign. We will check both and tell you exactly what you are taking on: the rent, the bond, the lease term and any traps, so there are no surprises after settlement.
This article provides general information only and is not legal advice. For advice specific to your situation, consult a qualified conveyancer or solicitor.
FAQ
Does the tenant have to leave when I buy the property?
No. In most cases the tenant stays and you take over the existing lease. A change of owner does not end the tenancy on its own. To get the property empty, vacant possession has to be agreed in the contract of sale before you sign.
What happens to the bond when I buy a tenanted property?
The bond stays with the Residential Tenancies Bond Authority (RTBA); the record is transferred so you are listed as the rental provider. This rental provider transfer should be started through the RTBA website within 5 days of the change of owner, so you are the recorded rental provider when the tenancy ends.
Who gets the rent at settlement?
Rent is adjusted at settlement. Under the usual Victorian contract position, the seller is entitled to rent up to and including settlement day, and you are entitled to it after settlement, unless the contract says otherwise. If the tenant has paid in advance, the statement of adjustments should credit you for the part that falls after settlement.
Can I increase the rent after I buy?
Only within the normal Victorian rules. Rent can be raised once every 12 months, measured from the date of the last increase, not from the date you bought. Since 25 November 2025 you must give at least 90 days‘ written notice on the prescribed Consumer Affairs Victoria form, and rent cannot be raised during a fixed term unless the lease allows it.
Can I move in if there is a fixed-term lease?
Not until the fixed term ends. A fixed-term lease binds the new owner. Moving in yourself is a separate owner-occupation reason that generally needs 90 days‘ notice and evidence, and it cannot end a fixed term early. There are specific end-of-fixed-term rules where the lease already contains a move-in term, so get advice on the actual lease. If you need the home by a set date, plan the purchase around the lease end.