Buying a tenanted property in Melbourne?

You finally find it after weeks of scrolling Domain on the tram ride home, rainy Saturday inspections, and auction crowds in Brunswick. The floorplan works, the street feels right, and the price guide looks within reach. Then you spot the line in the listing or contract: the property is tenanted.

That can throw first home buyers off balance. You are not just buying bricks and mortar. You may also be stepping into an existing rental arrangement, with a real person living there, a lease already on foot, and rules about when you can move in.

That does not mean you should walk away. Some tenanted homes draw fewer emotional bidders, which can help in a competitive Melbourne market. Rent coming in for a short period can soften the blow while you wait. But if your plan is to live there, timing matters just as much as price.

Start with the question that really matters

Before you get attached to the kitchen bench or the north facing courtyard, ask one question: are you buying the property subject to the tenancy, or are you buying with vacant possession?

Those are very different deals.

If you buy subject to the tenancy, the renter usually stays on under the existing agreement and you take over as the rental provider at settlement. You do not get to move in just because you now own the property.

If you buy with vacant possession, the seller is promising the property will be empty at settlement. That only works if the contract is drafted properly and the seller can actually deliver on it.

This is why a tenanted property needs proper legal review before you sign. At auction, that means before auction day, because there is no cooling off once the hammer falls.

The lease usually comes with the property

This catches plenty of buyers. In practice, when a rented property is sold in Victoria, the tenancy does not vanish on settlement day. The rent, bond and lease terms usually carry on, and the new owner steps into the old owner’s place.

So if the current rent is $560 a week, you cannot settle and decide it should now be $650. If the lease runs until spring, you cannot simply tell the tenant to be out by next Friday because your removalists are booked.

That is why the lease end date matters so much. It can shape your moving plans, your finance arrangements, and whether a first home buyer benefit still works for you.

Fixed term or month to month can change everything

The next thing to check is whether the renter is on a fixed term lease or a periodic month to month arrangement.

If the tenancy is periodic, an owner who plans to move in can usually give a notice to vacate after settlement for owner occupation, but the notice period is now longer than many buyers expect. Since the Victorian rental law changes that started on 25 November 2025, the standard period for this reason is 90 days, with supporting evidence required.

If the tenancy is fixed term, things can slow down even more. A notice to vacate for owner occupation must usually have an end date on or after the lease end date. Since the 2025 changes, there is no general end of fixed term ‘no fault’ exit path. When the fixed term ends, the tenancy will usually roll into a periodic agreement unless the parties sign a fresh fixed term lease or a valid notice is given for a permitted reason.

For a first home buyer, the maths matters more than the legal jargon.

Say you buy a villa unit in Coburg with four months left on the lease. You may need to wait out those four months, then allow the 90 day notice period before you can move in. That is already around seven months.

Now change that to a lease with 10 months left to run. Suddenly you are nudging past a year before you can realistically take up occupation yourself. That can upset your whole plan.

The duty trap first home buyers need to watch

For many buyers, this is the part that bites hardest.

In Victoria, the first home buyer stamp duty exemption applies to homes up to $600,000, and a concession applies from $600,001 to $750,000. To keep that benefit, at least one purchaser must move into the home within 12 months of settlement and live there for 12 continuous months.

So the lease is not just a rental issue. It is a duty issue too.

If a tenant’s fixed term, plus the notice period you still need to give, pushes your move in date beyond that 12 month window, you may miss the exemption or concession you were counting on. For a first home buyer stretching for stamp duty, loan costs, moving costs and a bit of post settlement work, that is not a small detail. It can change the deal.

The First Home Owner Grant is a separate question again. For most buyers looking at an older flat, terrace or weatherboard, it will not apply because that grant is generally aimed at eligible new homes.

What a careful contract review should cover

A standard glance over the contract is not enough here. Your conveyancer should be looking at the tenancy papers with the same care they give the title, easements and owners corporation material. This is where good Section 32 checks earn their keep.

A few points deserve close attention.

The full lease and any variations. You want the signed rental agreement, the start date, end date, rent amount, names of the renters, and any later changes.

Rent paid to date. Ask for the ledger. If rent is behind, or there is a live dispute, you want to know before settlement, not after.

Bond records. The bond should still be lodged with the RTBA, and the transfer of rental provider details needs to be handled properly after settlement. Missing paperwork creates headaches at the end of the tenancy.

Repairs and complaints. Ask whether there are outstanding maintenance issues, unresolved breaches, insurance claims, mould complaints, or VCAT or dispute resolution matters on foot.

Rental minimum standards and safety records. If the property will stay rented for a period, you may inherit work that needs doing. Think fixed heating in the main living area, compliant electrical protection, and up to date gas and electrical safety checks where required. In an older Melbourne apartment or weatherboard, that can mean real money.

Special conditions. If you need vacant possession, the contract should say so clearly. If you are buying subject to the tenancy, the contract should deal with handover of the lease, keys, rent ledger, condition report, bond details and any rent already paid in advance.

This is also the time to think about insurance. If the property will remain tenanted after settlement, speak with your broker or insurer so the cover suits the actual use of the property from day one.

Settlement works a bit differently when tenants are still there

With an owner occupied purchase, settlement often feels neat and simple. Money moves, keys change hands, and you start measuring for the fridge.

A tenanted settlement is more layered.

Rent is usually apportioned at settlement in the same way rates and other outgoings are adjusted. Your conveyancer will factor this into the statement of adjustments so the seller is paid up to settlement and you receive credit for the period after settlement.

The bond stays with the RTBA, and the rental provider details need to be updated.

You will also want a clean handover of the tenancy file: the lease, condition report, ledger, bond details, keys, remotes and safety records if they exist. If there is a managing agent in place, it should be clear whether they are staying on after settlement.

Inspections can feel awkward, and sometimes limited

Buyers often get a tidier, more honest look at a vacant property than a tenanted one. That is life.

A renter has rights around entry. For sales inspections in Victoria, written notice is required, the seller or agent must try to agree times with the renter, and inspections for buyers are limited unless the renter agrees to more. The renter is also entitled to compensation for each sales inspection.

That means the inspection process can be slower and less revealing than usual. Furniture can hide cracks. Full wardrobes can block damp marks. A crowded garage can cover the back wall you wanted to see.

If you are serious about the property, try to get your building inspector through during an approved inspection window before you commit.

What if you need the place empty by settlement?

Then the contract needs to be built around that goal from the start.

Some first home buyers assume the seller can just ‘sort out the tenant’ before settlement. Sometimes they can. Sometimes they cannot. A fixed term lease may still have months left to run. The notice may not be ready to go yet. The tenant may leave by agreement, or may not.

If you need to move in soon after settlement, the safest path is often to negotiate vacant possession and have your conveyancer draft the contract to match. That way, the risk sits where it should sit, with the seller who is promising the property will be empty.

Without that, you may settle, become the owner, and only then realise your move in date is a long way off.

If the tenant does not leave when expected

This is another area where buyers can be too relaxed.

Even when a valid notice to vacate has been served, the process is not self enforcing. If the renter stays, the next step is usually an application to VCAT for a possession order. If an order is made and the renter still remains, only Victoria Police can carry out the eviction under warrant.

So no, a new owner cannot change the locks, put belongings on the nature strip, or cut off power and hope it all sorts itself out. That will only make matters worse.

Most tenancies do not end in drama, but if your move in date is tight, allow for delay rather than assuming the cleanest possible outcome.

So, should a first home buyer still buy a tenanted property?

Sometimes yes.

A tenanted property can be a smart buy when the lease is short, the paperwork is clean, the numbers still work and you have a realistic move in plan. It can even mean less competition in a heated pocket of Melbourne.

But it only works when you go in with your eyes open.

If the lease is long, the contract is fuzzy, or the duty timing is tight, that bargain can stop looking like a bargain very quickly. This is one of those moments where early advice is worth far more than late damage control.

Talk to Pearson Chambers before you sign

If you have found a Melbourne property with tenants in place, get the contract checked before you commit. We can review the lease, pick up timing risks, look closely at duty issues, and make sure the special conditions match what you actually need.

We offer a complimentary Section 32 contract review for buyers who want clear, practical guidance before they sign.

This is general information only, not tailored legal advice. For advice shaped to your purchase, contact Pearson Chambers Conveyancing.

Email contact@pearsonchambers.com.au.

When you are buying your first home, a tenanted property is not always a problem. But it is never something to guess your way through.