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How Vacant Is “Vacant Possession”?

Empty-Room

The term “vacant possession” is one that comes up a lot in property transactions, but what does it actually mean and how does it affect you as a property owner?

In a contract for sale of land, the seller is required to deliver up vacant possession of the property to the buyer at settlement, unless the property is already subject to an existing tenancy.   This means that:

  1. the property must be empty of people;
  2. no-one else has the right or ability to occupy or possess the property other than the buyer; and
  3. the property must be empty of chattels, i.e. moveable objects.

The third element of this definition, that the property be “empty of chattels”, is one which has been the subject of many cases in the Courts.  The general test that has emerged is that in order to show that a seller has failed to give vacant possession, the chattels remaining on the property must be an impediment which substantially prevents or interferes with the enjoyment of the buyer’s right to possess a substantial part of the property.

This largely depends on the facts and circumstances of the particular case.

Where a seller leaves large or excessive quantities of rubbish on a property, courts have decided that this constitutes a failure to give vacant possession.  On the other hand, in a case where a seller left a small number of empty pallets and dismantled racking in a large warehouse, the court found that those items did not constitute a substantial impediment and therefore vacant possession was found to have still been given.

To avoid any arguments regarding the removal of rubbish or goods, it is important to arrange an inspection of the property just prior to settlement to ensure that the property has been vacated and any goods and rubbish have been removed.

It is important to be aware of the requirement to give vacant possession as failure to do so entitles the buyer to terminate the contract or to sue for damages.

For more information please contact our property team on 07 4671 6000.