Planning to sell your holiday-let investment unit? If so, make sure you take into account any forward bookings by guests, or you may learn a very expensive lesson.
I received a call from a client who owned multiple units. She’d sold one of her units in Surfers Paradise and made the most common mistake in the book when it came to selling units... that is, she failed to pass on to the buyer of the unit the benefit/burden of forward bookings made by the resident manager or the letting agent.
The law is very clear and provides that forward bookings made by an owner of a unit or by their agent are binding upon that owner, and if the buyer of the unit fails to honour those bookings then the seller can be sued for the loss and damage that flows to the tenant/guest. This will often be considerable, as the unit would usually have been booked for holiday purposes.
Imagine the sympathy a magistrate would have in a claim brought by an upset guest whose holiday has been ruined because the unit that they booked a year earlier for their annual holidays had been sold and the buyer wouldn’t honour the forward booking because they wanted to use the property themselves.
The way to avoid such a problem is to insert a clause* like this in the contract of sale:
The buyer acknowledges that the lot purchased is subject to future tenancies which may have been arranged as casual holiday tenancies by the seller’s letting agent and the buyer agrees to accept possession subject to such tenancies.
- Always have your solicitor review any clauses you plan to use before you use them.
Original article: http://www.apimagazine.com.au/property-investment/forward-bookings-of-holidaylet-units