Minimum housing standards: Buying or selling a tenanted property

In this article we examine minimum housing standards pursuant to the Residential Tenancies and Rooming Accommodation Act 2008 (Qld) (RTRA Act) in the context of the purchase or sale of a residential property that is already tenanted and potential implications for agents.

Minimum housing standards

As all agents are aware, minimum housing standards in Queensland are prescribed and set out in schedule 5A of the Residential Tenancies and Rooming Accommodation Regulation 2009 (Regulations). These Regulations specify that premises must (among other things):

• Be weatherproof, structurally sound and in good repair;
• Have fittings and fixtures in good repair and not likely to cause injury to a person through the ordinary use of the fixtures and fittings;
• Have functioning locks or latches fitted to all external windows and doors to secure the premises against unauthorised entry;
• Be free from vermin, damp and mould (excluding cases where this has been caused by the tenant);
• Have privacy coverings (such as blinds, curtains, tinting or glass frosting) for windows in all rooms in which tenants are reasonably likely to expect privacy, including, for example, bedrooms;
• Have adequate plumbing and drainage for the number of persons occupying the premises and be connected to a water supply service or other infrastructure that supplies hot and cold water suitable for drinking;
• Have a bathroom and toilet facilities that provide the tenant with privacy;
• Have toilets that function as designed and are connected to a sewer, septic system or other waste disposal system;
• Have a kitchen with a functioning cook-top; and
• If a laundry is included, include fixtures required to provide a functional laundry other than whitegoods.

It is the responsibility of the lessor to ensure the property meets these minimum housing standards at the start of the tenancy. In addition, pursuant to section 185(3) of the RTRA Act, it is the responsibility of the lessor to ensure, whilst the tenancy continues, the premises and inclusions otherwise comply with the minimum housing standards applying to the premises or inclusions.

A purchaser buying a residential property as an investment that is already tenanted (and/or a new managing agent acting on behalf of the purchaser) should not assume that, as the property is already tenanted, the property complies with the minimum housing standards.

We set out brief checklists for purchasers (and agents) to consider below.

Pre-purchase

1. Obtain a copy of, and review, the existing tenancy agreement and ledger. It is important that prospective purchasers understand the terms of the tenancy they are potentially inheriting, including whether it is a fixed term or periodic tenancy agreement, and any special clauses that may apply;
2. Request copies of prior inspection reports (including the entry condition report);
3. Obtain a pre-purchase building inspection report which considers the minimum housing standards, identifies any potential issues and any necessary repairs, maintenance or structural alterations required;
4. Confirm that a bond has been lodged with the Residential Tenancies Authority (RTA); and
5. Seek professional advice and consult with a solicitor to understand the obligations as lessor, including any applicable landlord insurance policies which may need to be entered into/updated.

In the event that the property is non-compliant with the minimum housing standards, the purchaser has an opportunity prior to entering into a contract to purchase the property to address any non-compliance issues, seek advice from a solicitor, and have the contract address any issues prior to the date of settlement of the contract to ensure the property complies with the relevant Regulations at the date of settlement (the date the purchaser becomes the lessor of the property).

Damage to the property prior to settlement

The risk over the property passes to the purchaser at 5pm one business day after the contract date. However, the seller still has the responsibility to take reasonable care of the property until the date of settlement.

Purchasers should complete a pre-settlement inspection to ensure that no fixtures have been removed or damaged. Fair wear and tear or damage caused to the property by something outside the seller’s control (such as a storm or flood) is not usually something the seller is responsible for.

If a pre-settlement inspection identifies that the property has been damaged and potentially no longer complies with the minimum housing standards, purchasers should notify their conveyancing solicitors as it may be an issue that can be resolved prior to settlement of the contract. Each situation will differ according to the terms of the contract and condition of the property.

Settlement

It is imperative that at the date of settlement, all tenancy paperwork is assigned appropriately, including:

1. Notifying the Residential Tenancies Authority in relation to the transfer of bond by way of a Change of property manager/owner Form 5 and updating all lease/insurance documentation;
2. Informing the tenant about the new ownership, including the contact details of their new lessor/managing agent and rental payment information, by way of a notice of attornment;
3. Settling up the ledger, taking into account the date ownership transferred to the new lessor.

Once the contract of sale settles, the purchaser (new lessor) will be responsible for ensuring that the property meets the minimum housing standards. If a lessor fails to comply with any prescribed minimum housing standards, it will open up the lessor to potential action from the tenant for breach of the tenancy agreement.

If the breach is not remedied, the tenant may issue the lessor with a notice of intention to leave and subsequently end the tenancy agreement by handing over vacant possession on or after the handover day.

Alternatively, the tenant can apply to the Tribunal under s 191 of the RTRA Act and seek an order requiring the lessor to remedy the failure to comply with section 185 of the RTRA Act and ensure that the premises comply with any prescribed minimum housing standards.

Conclusion

It is imperative that new lessors and any managing agents acting on their behalf ensure that property continues to comply with minimum housing standards throughout the term of the tenancy agreement. A thorough inspection of the property should be carried out at the earliest opportunity (to prevent any surprises in the form of expensive remedial costs post settlement) and where necessary professional advice from a builder, tradesperson and/or solicitor should be sought. 

Agents should encourage potential purchasers to conduct their own investigations before entering into a contract of sale for the purchase of an investment property that is already tenanted.

Read more about property sales: Managing the new entry restrictions, open homes and private inspections: Residential sales.

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