Selling rented units after conversion: tenancy protection, buyer information and price discount

Condominium conversion and sale do not turn a rented apartment into a vacant unit. The buyer acquires a unit whose use and income remain shaped by the existing main lease. The review must cover more than rent and term. Side agreements, ancillary areas, deposit, payment history, tenant improvements and pending proceedings may all affect the acquired position. Without that record, an apparently favourable price can conceal a lasting income or use restriction.

The seller should prepare a separate disclosure package for each rented unit. The lease, amendments, correspondence and actual occupation must tell the same story. Buyers need to understand which landlord position transfers and which future outcomes are only assumptions. There is no statutory percentage discount for a rented unit. The economic adjustment follows from documented income, contractual restrictions, legal risk and realistic future use.

The main lease survives the ownership change

Section 2(1) MRG binds the landlord’s successor to a valid main lease once the premises have been handed over, even if the lease is not registered in the land register. If condominium ownership is established after the lease was concluded, the landlord position passes to the new condominium owner of that unit. A unit sale therefore does not create a fresh lease or allow the buyer to rewrite rent, term or termination rights.

Unusual side agreements require particular attention. The successor is bound by them under section 2(1) MRG if the successor knew or should have known of them. Sellers should disclose the complete record; buyers should review amendments, handover records and material correspondence, not only the signed main document. The rent roll and lease agreements topic page explains how these sources are reconciled per unit.

Build a reliable sale file for every rented unit

A useful file contains the main lease, amendments, indexation clause, deposit evidence, rent demands, payment position, service charge accounts, handover records and known tenant improvements. It should also include rent review, termination or eviction proceedings and agreements covering cellars, parking, gardens or other ancillary areas. The unit designation must match the valuation report and future land register entry.

Any discrepancy should be explained before marketing. If the rent roll states another area, the tenant uses a cellar allocated elsewhere in the conversion plan or evidence of a fixed term extension is missing, the sales process should not conceal the issue. The data room completeness check supports compilation, while legal review determines the effect of each clause and gap.

Buyer information must connect rights, occupation and figures

Good buyer information separates proven facts from expectations. Current rent, service charges, receipts, deposit, contractual term and documented rights can be evidenced. Future reletting, a possible tenant departure or a higher rent after a later event are assumptions. They should not be marketed as certain characteristics of the unit.

Actual occupation also matters. A shop may be used differently from its lease, a tenant may have sublet an area, or improvement commitments may remain outstanding. The buyer needs that information before becoming bound so that price, finance and contractual protection reflect the actual position. The condominium conversion and unit sales topic page covers the wider structure of the sales programme.

Derive any price discount from specific factors

A rented unit has no statutory standard discount compared with a vacant unit. Relevant factors include sustainable net income, the length and quality of contractual restrictions, the applicable MRG regime, physical condition, open claims, financing cost and the realistic strategy for the unit. A generic percentage obscures which factor actually drives value.

The valuation should use transparent scenarios. A base case relies on the documented lease and current cost position. Other cases may show potential changes or later reletting, but they must remain identified as assumptions. The sale contract should not silently guarantee an optimistic scenario. The apartment building risk check helps organise the principal legal and economic uncertainties.

Review expense allocation after conversion separately

Condominium ownership adds an owners’ expense layer to the tenancy relationship. Section 32 WEG 2002 contains a special rule for main leases concluded before condominium ownership was established. Reserve fund contributions and maintenance or improvement costs generally follow co-ownership shares, while other expenses may continue to use the allocation key relevant to the existing lease unless a valid alternative applies.

The buyer therefore needs more than the tenant’s current service charge demand. The review should compare expenses recoverable from the tenant with the costs borne by the condominium owner. The condominium agreement and future administration must recognise that interface. Otherwise the headline rent looks attractive while the owner’s actual net income is materially lower.

Tailor the sale contract and effective date to the lease

The sale contract should identify the disclosed lease, amendments and relevant circumstances. It should allocate the deposit, current rent, service charges, arrears, credits, pending proceedings and unfinished accounts. Warranties must reflect the reviewed record. A broad statement that no side agreements exist is unsafe if management correspondence has not been examined.

At the effective date the buyer needs current balances, contact details, deposit evidence and the status of outstanding communications, not merely keys and a contract copy. The handover and effective date topic page sets out the wider building process. Each rented unit should also have its own handover sheet so that payments and information are not lost between the whole building and the individual apartment.

Avoid recurring mistakes in rented unit sales

Common mistakes include copying a lease description from the rent roll, omitting side agreements, lacking deposit evidence, failing to align ancillary areas and applying a price discount without an income calculation. It is equally dangerous to assume that the buyer can readily terminate the lease after closing. Such assumptions create later disputes over warranties, mistake and promised characteristics.

A sound process begins with a complete unit reconciliation, continues with clear buyer information and ends with an effective date handover. This reduces seller liability and enables the buyer to base price and financing on evidence. A pending case or material document gap should be valued openly and linked to an appropriate responsibility or security provision in the sale contract.