Q: I’m a property investor with a tenanted rental property that I plan to put on the market for sale. I intend to keep the tenants in the property while it’s being sold and am considering reducing the rent as a gesture of goodwill for their cooperation in keeping the place tidy and allowing open homes. Is this a good idea, or is there a better approach to keep the tenants happy during the sale process?

A: Reducing the rent may seem like a considerate way to keep your tenants happy during the sale process, but I would advise against it. When you reinstate the rent back to the previous level, it could be considered a rent increase, which you may be precluded from doing as the Residential Tenancies Act states, “Rent must not be increased within 12 months after the date on which the last increase took effect”.

Instead, I recommend an incentive payment system. Here’s how it works: continue charging the full rent and keep a tally of the weeks the property is on the market. At the end of the sale process, if the tenants have cooperated fully (with your sole discretion and confirmation from your real estate agent, if you have one), you provide them with an incentive payment.

This payment could be a set amount per week for the duration the property was on the market. This approach ensures the tenants remain motivated to cooperate throughout the entire process, knowing there is a financial reward at the end.

If you simply reduce the rent, there’s a risk the tenants might still not fully cooperate. An incentive payment system keeps everyone engaged and working towards a successful sale.

Ryan Weir

propertyscouts.co.nz