Buying Property Subject to Existing Tenancies: Key Legal Traps for Investors
Most investors price a tenanted property on its rent roll, then find at settlement that they bought the tenancy agreement as well as the building. The tenant does not leave because the title changed hands, and neither does the rent history, the missing paperwork, or the notice period now sitting between you and your plan for the asset.
Queensland has rewritten much of this since 2022. Notice periods doubled, the rent increase limit started following the property rather than the tenancy, and sellers now disclose the tenancy before you sign.
What does buying a property subject to an existing tenancy mean?
Buying subject to an existing tenancy means you take ownership with the tenant in place and you become the lessor on the terms already agreed. The sale does not end the agreement. In Queensland, the buyer assumes the tenancy that existed before settlement, including its term, rent, bond, and any breach or dispute already on foot.
Your room to move is whatever the previous owner left you. Treat the purchase as four inheritances, priced separately: the term, the rent ceiling, the evidence file, and the money.
Trap 1: You inherit the term, and you can't shorten it.
A fixed-term agreement runs to its end date, and the tenant need not negotiate an early exit.
How much notice must a tenant get when a property is sold in Queensland?
A tenant must be given at least two months' notice on a Notice to Leave (Form 12) where the ground is a sale contract requiring vacant possession. The sale ground cannot end a fixed-term agreement early. Where the agreement is fixed term, the tenancy ends on the later of the term end date or the notice expiry.
A great deal of material still online says four weeks. That has been wrong since 1 October 2022. Owner occupation, renovations, redevelopment, and change of use carry the same minimum.
Only the seller can serve that notice, because the ground depends on a contract to sell with vacant possession, and few will serve it before the contract goes unconditional. A 30-day settlement and a two-month notice period do not fit together. Build the sequence in as a special condition and tie settlement to the handover day.
Watch the re-letting restriction. Where a tenancy ends on the ground of sale, owner occupation, or change of use, the Residential Tenancies Authority (RTA)'s position is that the premises must not be let or offered for a residential tenancy for six months after the handover day, and penalties apply. Get advice before you ask for vacant possession.
A negotiated surrender, documented in a separate written agreement, beats any notice period and is the option most sellers have never been offered. It is part of the same residential property law work as the contract.
Trap 2: You inherit the rent, and the 12-month clock does not reset.
Can a new owner increase the rent after settlement in Queensland?
A new owner cannot increase the rent until at least 12 months after the last increase for the premises. Since 6 June 2024, the annual rent increase frequency limit attaches to the property rather than the tenancy, so settlement does not reset the clock. At least two months' written notice is required.
A fresh agreement with a new tenant does not restart the clock either. If the previous owner raised the rent five months before settlement, your first increase is seven months away. On a property under-rented by $80 a week, that costs about $2,400; you may already have capitalised into the price. You also have to prove the date within 14 days if a tenant asks, which is why the REIQ contracts now require the seller to disclose the tenancy history and the last increase date.
Trap 3: The disclosure file becomes your evidence file
Since 1 August 2025, a seller must give the buyer a signed Seller Disclosure Statement (Form 2) and prescribed certificates before signing, and inadequate disclosure can give a buyer a right to terminate. The better reason to read the file closely: every document the seller cannot produce is one you will need later and will not have.
The entry condition report (Form 1). Without it, you have no agreed record of the property's condition at the start of the tenancy, and your bond claim two years from now is an argument you will probably lose.
The bond. Residential bonds are held by the RTA. Get the bond number, confirm the amount, and lodge a Change of property manager/owner (Form 5). If a self-managing owner has held the bond personally, you inherit a liability with no fund behind it. The tenant then has to be told in writing who the new owner is and where to pay rent.
Compliance you did not create. Minimum housing standards have applied to all Queensland tenancies since 1 September 2024, and pool safety and smoke alarm obligations are yours from day one. Entry notice has been 48 hours since 1 May 2025, so book the pre-settlement inspection early.
Trap 4: Commercial and retail tenancies fail differently
The unregistered lease and the option trap.
Under the Land Title Act 1994 (Qld), a registered owner takes free of unregistered interests, with limited exceptions. One is a lessee under a short lease of three years or less, so an unregistered two-year lease with a tenant in possession binds you. But s 185(2) carves out any right to renew beyond three years from the start of the original term. A three-year unregistered lease with a three-year option is protected for its term and unprotected as to the option, settled in Friedman v Barrett [1962] Qd R 498. If the yield you paid for assumed six years of income, you own three. It is the most common valuation error on commercial property purchases.
Outgoings you may not be able to recover.
The Retail Shop Leases Act 1994 (Qld) excludes land tax from recoverable outgoings, and a clause making a retail tenant reimburse it is void. Retail outgoings are also only recoverable if the retail lease sets out what is payable and how it is apportioned, and if the lessor issues an annual estimate and an audited annual statement on time. Where the previous owner never did, you inherit the gap.
Security that does not travel.
A bank guarantee is issued to a named beneficiary and does not become yours because you bought the building. Cash deposits, incentive deeds and side letters are the documents most often left out of a data room, and usually the ones that cost money.
What you inherit, by tenancy type
| Question | Residential tenancy (RTRA Act) | Retail shop lease (RSL Act) | Other commercial lease |
|---|---|---|---|
| Can you end it early after settlement? | No. Fixed term runs to its end date; grounds require 2 months' notice | No. Only per the lease terms | No. Only per the lease terms |
| Can you raise the rent straight away? | No. 12 months since the last increase for the premises, then 2 months' notice | Only at the review dates in the lease, max once a year, no ratchet | Only at the review dates in the lease |
| Binds you if unregistered? | Yes, statutory tenancy | Yes if 3 years or less and tenant in possession; options beyond 3 years not protected | Same short lease rule applies |
| Who holds the security? | RTA holds the bond | Lessor holds cash bond or bank guarantee | Lessor holds cash bond or bank guarantee |
| Can you recover land tax from the tenant? | No | No, and a clause requiring it is void | Generally yes if the lease provides for it |
| Statutory disclosure you should demand | Form 2, tenancy agreement, last rent increase date, bond number, Form 1 | Lessor and lessee disclosure statements, outgoings estimates, audited statements | Lease, all side deeds, guarantees, registration status |
Trap 5: The settlement adjustments: where the money goes
Arrears do not come with the property. Rent unpaid at settlement is a debt owed to the previous owner, so treat arrears as a price adjustment. Rent paid in advance cuts the other way, and the paid-to date comes from the ledger, not the agent's summary.
The land tax option is an active choice. The current REIQ contracts make you choose between no adjustment, a single holding basis, or the seller's actual liability. A seller holding through a company, trust, or as an absentee can have a far larger bill than the property alone would generate.
Withholding applies to every sale now. Since 1 January 2025, foreign resident capital gains withholding is 15 per cent with no value threshold, so a missing ATO clearance certificate is what most often delays a tight settlement.
The mechanics are ordinary conveyancing work. Pricing the tenancy is not, and both land on the same day.
What to do before you sign
Get the documents, not the summary. The agreement, every renewal, the rent ledger, the entry condition report, the bond number, and the date of the last rent increase. For commercial, add every side deed and the registration status.
Search the title before you talk price. A property carrying property covenants or an unregistered option is not the property in the marketing.
Model year one on the rent you may legally charge. The gap to market rent is a price negotiation.
Decide what you need and when, then draft the contract around it. Vacant possession, a surrender, an assumed tenancy, and a replacement bank guarantee are four different sets of special conditions, and none can be retrofitted.
Let our property lawyers guide you
Bradley & Bray has advised Sunshine Coast investors and landowners for over 50 years across real estate and property law. Our property law FAQs cover the common questions, and our property lawyers in Nambour and across the Sunshine Coast can review the tenancy and the contract together. Send it through before you sign. Contact us today to get started.
Disclaimer: This article is general in nature and does not constitute legal advice. If you require legal advice in relation to your personal circumstances, you must formally engage our firm or another firm to provide legal advice in relation to your matter. Bradley & Bray lawyers take no responsibility for any use of the information provided in this article.
