When the Vendor Stays After Settlement Melbourne

By Pearson Chambers Conveyancing.
Published May 1st 2026

This question lands on our desk when settlement dates don't quite line up. A vendor may have sold in Glen Iris, bought off the plan in Hawthorn, and suddenly needs four more weeks before their next place is ready.

The short answer: A vendor can stay after settlement in Melbourne only if the buyer agrees in writing, usually through a special condition in the contract or a post settlement licence to occupy. From settlement, the buyer owns the property and should have building insurance in place. If the stay starts looking like a residential rental arrangement under the Residential Tenancies Act 1997 (Vic), the buyer may also face bond, condition report, notice and VCAT issues, and first home buyers must still satisfy the 12 month residency rules for Victorian duty benefits and grants.

What does it mean when the vendor stays after settlement?

It means ownership changes hands, but the vendor keeps occupying the property for an agreed period. In a normal purchase, you would expect to collect the keys once settlement is confirmed, which is why buyers often ask how soon you can move in after settlement before booking removalists or ending a rental lease.

With a vendor stays arrangement, you still become the registered owner at settlement. The vendor keeps living in the home until the agreed handover date, then leaves and gives you the keys.

The key word is agreement. The standard position in a Victorian sale is vacant possession at settlement unless the contract says something different. A verbal promise through the agent is not enough. The right to stay should be written into the contract before signing, or recorded in a separate licence signed before settlement.

Why do vendors ask to stay after settlement in Melbourne?

Vendors usually ask because their sale and purchase dates don't match. This comes up often with downsizers moving from family homes in suburbs such as Camberwell, Brighton or Balwyn into apartments that are still settling, being finished or waiting on certificates.

Common examples include:

a vendor buying interstate who needs a few extra weeks to relocate
an off market sale where the vendor accepted quickly but has not found their next home
a family wanting children to finish a school term before moving
a delayed new build, townhouse or apartment completion

For buyers, agreeing to a short stay can sometimes help win a property, especially in competitive inner north and bayside negotiations. We've seen first home buyers in places such as Brunswick and Footscray become the preferred buyer because they offered a clean contract and gave the vendor a short, documented licence period.

That doesn't mean you should say yes without conditions. A kind gesture can become expensive if the vendor overstays, damages the property or delays your own move.

Is a post settlement licence to occupy different from a tenancy?

Yes. A post settlement licence to occupy gives the vendor permission to stay for a set period, while a residential tenancy gives stronger statutory rights to the person living in the property. The difference matters if you need the vendor to leave.

A licence to occupy is usually the cleaner path for a short, fixed stay. It gives the vendor limited permission to occupy the property after settlement, often with a daily licence fee and a strict end date. A pre settlement licence to occupy is the mirror image arrangement, where a buyer is allowed in before they own the property.

A residential rental agreement is different. If the vendor has exclusive possession, pays rent, stays for a longer or open ended period, and the arrangement looks like a normal rental, Victorian rental laws may apply no matter what the document is called. That can bring in minimum rental standards, bond rules, condition reports and formal notice processes.

A practical rule: keep short vendor stays tightly drafted and limited. Once the proposed period stretches beyond a few weeks, get advice on whether it should be treated as a residential rental arrangement from the start.

What should the written agreement cover?

The agreement should spell out dates, money, condition, insurance and what happens if the vendor does not leave. This is not a handshake issue, even when everyone seems friendly.

A strong post settlement licence usually covers:

the start date, usually settlement
the exact date and time vacant possession must be given
the daily licence fee and how it is paid
any security amount held back until the vendor leaves
who pays utilities, water use, rates and owners corporation charges
the vendor's obligation to keep the property in the same condition
no alterations, subletting or extra occupants without consent
insurance, indemnity and inspection rights
what happens if the vendor overstays
final inspection, keys and condition record at handover

The end date is the piece buyers should watch most closely. A vague phrase such as 'until the vendor's next property settles' is risky. Use a calendar date.

Who pays the vendor stay fee, bond and settlement adjustments?

The vendor usually pays a daily licence fee for the time they remain after settlement. The amount is commonly set by reference to market rent for a similar property, then converted to a daily rate.

For example, if a townhouse in Brunswick would rent for about $700 a week, the daily fee might sit around $100 a day. That number is not a rule. It should reflect the property, the length of stay, the buyer's carrying costs and the negotiation.

The cleanest method is often a settlement adjustment. The fee is calculated up front and allowed for in the settlement figures, rather than chasing payments after settlement. This sits beside the usual adjustments for rates, water and owners corporation fees. For background on how deposit money and settlement funds move in a Victorian sale, see our guide to section 27 of the Sale of Land Act.

For a licence, buyers often ask for a security amount to be held until vacant possession is delivered. For a rental agreement, a residential bond may need to be lodged with the Residential Tenancies Bond Authority. In most Victorian rentals, a bond cannot be more than one month's rent unless the weekly rent is more than $900 or VCAT has approved a higher bond.

How can the vendor staying affect first home buyers?

A long vendor stay can put first home buyer benefits at risk if it delays your move in date too far. This is one of the most common traps in first home buyer conveyancing in Melbourne.

For Victorian first home buyer duty benefits, at least one purchaser must live in the property for 12 continuous months, starting within 12 months of settlement. The duty exemption applies to homes with a dutiable value up to $600,000, and the concession applies from $600,001 to $750,000.

For the First Home Owner Grant, eligible buyers of new homes may receive $10,000 for a newly built or never occupied home valued up to $750,000. The grant also requires at least one applicant to live in the home for 12 continuous months, starting within 12 months of settlement or construction finishing.

A four week vendor stay is usually workable. A 10 month stay leaves little room for illness, renovation delays or work changes. If you can no longer meet the duty residency requirement, the SRO expects written notice within 30 days of becoming aware. For the First Home Owner Grant, the notice period is 14 days if the residency requirement is not met.

Before agreeing to a vendor stay longer than a few weeks, ask your conveyancer to run the dates against every concession or grant you plan to claim.

What should your lender and insurer know?

Tell your lender and insurer before settlement if the vendor will remain after settlement. Your loan approval and insurance policy may assume that you will occupy the property as an owner occupier within a set period.

Most owner occupier loans expect you to move into the home as your main residence. A very short licence may not cause concern, but a longer stay can start to look like an investment or rental arrangement. Your lender may want a copy of the licence or special condition before settlement.

From settlement, you are the owner, so you should have building insurance in place even if the vendor is still living there. The vendor should keep their own contents cover and should be responsible for damage they cause.

We've had clients come to us after an insurer or bank asked for documents that should have been prepared before settlement. It is much easier to answer those questions with a signed licence than with scattered emails between agents.

What if the vendor does not leave after settlement?

Your options depend on whether the arrangement is a licence or a residential rental agreement. That is why the structure matters before anyone signs.

If it is a licence, the document should set out the end date, overstay fee, termination steps and remedies. You may need legal action if the vendor refuses to leave, but a clear licence gives your side a stronger starting point than an informal text message.

If the arrangement is a residential rental agreement, the buyer may need to follow the notice to vacate process and apply to VCAT for a possession order. Rental providers in Victoria can only give notices for approved reasons, using the correct process and timing.

Either way, keep good records. Take photos at settlement, keep a condition note, save emails and take the final inspection seriously.

Should you agree to let the vendor stay after settlement?

You can agree, but only if the risk is priced, documented and time limited. The safer answer is not always 'no', especially where a short stay helps you secure a property you really want. Before you agree, check the end date, licence fee, lender position, insurance, first home buyer timing, overstay protection, rates, utilities and owners corporation charges.

If any answer feels uncertain, pause before signing. Once settlement happens, the balance of power changes.

Frequently asked questions

Can the vendor stay in the house after settlement in Victoria?

Yes, the vendor can stay after settlement in Victoria if the buyer agrees in writing before settlement. The contract should include a special condition or be supported by a separate licence to occupy. Without that written agreement, the usual position is that the buyer receives vacant possession at settlement.

What is a post settlement licence to occupy?

A post settlement licence to occupy is a written agreement allowing the vendor to remain in the property for a fixed period after settlement. The buyer owns the property from settlement, and the vendor usually pays a daily licence fee. It should have a clear end date, insurance terms and steps for dealing with an overstay.

Will the vendor staying after settlement affect my first home buyer stamp duty exemption?

It can if the vendor stay delays your move in date. Victorian first home buyer duty benefits generally require at least one purchaser to live in the home for 12 continuous months, starting within 12 months of settlement. A short stay may be fine, but a long stay can put the exemption or concession at risk.

Can I charge the vendor rent if they stay after settlement?

Yes, you can charge a fee if the vendor stays after settlement, but the wording matters. For a licence, it is usually called a daily licence fee rather than rent. If the arrangement looks like a residential rental agreement, Victorian rental laws may apply.

What insurance do I need if the vendor stays after settlement?

The buyer should arrange building insurance from settlement because they own the property from that point. The vendor should keep their own contents insurance and public liability cover. The written agreement should also say who is responsible if the vendor, their guests or their movers damage the property.

What happens if the vendor refuses to leave at the end of the agreed period?

If the arrangement is a licence, the buyer can rely on the licence terms and may need legal steps to recover possession and losses. If the arrangement is a residential rental agreement, the buyer may need to follow the Victorian notice to vacate and VCAT possession order process. This is why short, fixed licences need careful drafting before settlement.

About the Pearson Chambers Conveyancing team

Pearson Chambers Conveyancing is a Melbourne focused conveyancing team working with first home buyers, owner occupiers and property sellers across Victoria. We deal with contract reviews, Section 32 statements, settlement adjustments and first home buyer settlement issues every day. Vendor stay arrangements sit right where contract drafting, settlement timing, insurance and residency rules meet, so they are exactly the kind of detail we help clients sort out before they sign.

Sources we consulted

Need help with a vendor stays arrangement?

If the vendor in your contract has asked to stay after settlement, speak with Pearson Chambers Conveyancing before you sign. We can review the Section 32 and contract, prepare or review the special condition or licence to occupy, check the first home buyer timing, and help you avoid a messy handover.

Email contact@pearsonchambers.com.au.

General information only, current as at the date of publication. Victorian conveyancing rules and legislation change frequently. Please contact the Pearson Chambers Conveyancing team for advice on your specific contract.