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Vacant possession is a term used in property transactions to describe situations where a property is available at settlement at an agreed time and in an acceptable vacant condition, or when the settlement process has been completed for the buyer to move in. It is often an issue when a buyer intends to use the property as a home.

A Contract of Sale of Land has two options dealing with possession provided on settlement. It can either be “vacant possession” or “subject to existing tenancy”. If neither options are marked, there is a presumption that the buyer will obtain vacant possession on settlement.

Types of Vacant Possession

Vacant possession includes:

  • giving title to the property free from any tenancy or right of occupation; and
  • giving physical vacant possession.

Vacant possession will usually appear in both residential transactions and commercial lease transactions. This includes:

  • When property is sold or a lease is granted;
  • When a tenant vacates at the end of the term; and
  • When a tenant breaks a lease early, in which case vacant possession may well be a condition of the break.

Physical Vacant Possession

Physical vacant possession requires the vendor to remove all goods not included in the sale from the property prior to completion. It must be empty of chattels (moveable objects such as furniture, picture, boxes and rubbish) and no-one else must have the right to occupy or possess it.

There is also an additional contractual obligation for vendors to leave premises in a reasonably clean condition. A vendor must maintain the condition between exchange and settlement. This includes not damaging the property and taking reasonable care to preserve it in the condition it was in at the date of the Contract. It is the vendor’s responsibility to clean up the premises prior to passing it over to the purchaser.

Consequences of Failure to Give Vacant Possession

Failing to give vacant possession has a number of serious consequences for the tenant. For commercial leasing, the lease will not terminate and the tenant will remain bound. A residential buyer has the option to apply for specific performance as well as damages. For a commercial tenant, failure to give vacant possession at the end of the lease will give right to damages.

Key Takeaways

If you need legal assistance with purchasing or leasing a property, LegalVision’s experienced lawyers can assist. Call us today on 1300 544 755.


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