When buying or selling a property, it is likely that you will come across the phrase “vacant possession”, and you may even wonder to yourself what that means. In NSW, the Contract for the sale and purchase of land has two options for how the property is sold, with vacant possession or subject to existing tenancies. A property is sold subject to existing tenancies where the property is currently leased, whether in the form of a residential, retail or commercial lease.
In most cases, vacant possession is provided on settlement. This means that the vendor provides to the purchaser the property untenanted and free from any chattels (tangible items) not included in the sale. The inclusions in the sale will be clearly marked on the front page of the Contract and often include items such as air conditioning units, ceiling fans, blinds, and curtains. Therefore, prior to settlement, the vendor must arrange for the property to be cleared of their furniture, personal items and any rubbish. The improvements marked on the front page of the Contract such as a house and garage are fixtures on the property and are included in the sale.
Under the Contract, the vendor must do everything reasonable to allow the purchaser to inspect the property in the three days prior to settlement. This is often referred to as the final inspection. The purchaser will attend the property with the agent to ensure that all improvements and inclusions marked on the Contract are present at the property and that vacant possession has been provided, if this is the option marked on the Contract. If during the final inspection the purchaser discovers that the property is tenanted or chattels remain on the property that are not inclusions, vacant possession may not have been provided.
If the property is free from tenants and chattels but the property is not reasonably clean, there may be a dispute about whether vacant possession has been provided. This may be the case where for example, the house is dirty, the lawn has not been mowed or building materials such as spare tiles have been left in the shed or under the house. If you are not sure whether vacant possession has been provided the best course of action is to contact your Solicitor for advice.
Many Contracts in NSW will include a special condition regarding present condition. This will generally mean that the property is sold “as is”, in its current condition, subject to any infestation or dilapidation and that the purchaser cannot make an objection, requisition or claim for compensation in relation to this. If this is a condition of the Contract, the vendor need only maintain the condition of the property as was present at the date of exchange, subject to fair wear and tear. If the property was already dirty, and the lawn overgrown at the time of exchange, the vendor will likely argue that this condition was known to the purchaser prior to exchange, and they entered the Contract on the basis that the property was being sold in its present condition.
The position of the Courts in relation to vacant possession was set out in Cumberland Consolidated Holding Ltd v Ireland [1946] KB 264 which involved a dispute that vacant possession of a warehouse had not been provided, as rubbish and hardened cement bags were left in the cellar, making it unusable. The Court determined that vacant possession requires no impediment which substantially prevents or interferes with the enjoyment of the right of possession of a substantial part of the property.
This principal was applied in the case of Nelson v Bellamy [2000] NSWSC 182 where building materials and rubbish including pallets, concrete blocks and timber off cuts were left at the property. The Court determined that these were not a substantial impediment which interfered with the purchaser’s right of possession as the material was only left in the alleyway and undercroft which were not substantial parts of the property.
The decision of Cumberland Consolidated Holding Ltd v Ireland [1946] KB 264 has also been applied more recently in Victoria in Lex Group Holding Pty Ltd & ors v De Ren Xu [2019] VSC 238 and in Queensland in Bagata Pty Ltd and Anor v Sunstorm Pty Ltd [2023] QSC 104.
If vacant possession has not been provided, the purchaser may be entitled to delay settlement. However, if the purchaser delays settlement without a legal basis for doing so, they may be in breach of the Contract. It is important to obtain legal advice so that you understand your rights and obligations under the Contract.
The team at Baker Love Lawyers are experts in property law and able to assist you in navigating any issues you may experience when buying or selling property. Please contact the office on (02) 4944 3322 should you require any advice or assistance.
