Selling A House With Tenants
If you’re a landlord looking to sell your rental property, but your tenants don’t plan on moving out, that doesn’t mean you have to wait before putting it on the market. You can either sell with vacant possession or sell the property with the tenants in situ.
However, selling a house with tenants can be difficult, particularly if you have a poor relationship with your tenants or the rental market is slow. In this blog post, we’ll look at your options when selling a house as a landlord and what rights you have as a tenant.
In this guide:
- What is a sitting tenant?
- Can I evict tenants in order to sell a property?
- How to sell a tenanted property
- Advantages of selling a property with tenants
- Maintaining a good relationship with your tenants
- Dealing with the buyer
- Advice for buying a house or flat with tenants
- Your rights as a tenant
What is a sitting tenant?
A ‘sitting tenant’ or ‘tenant in situ’ is a renter living in a property that the landlord intends to sell. If the tenant has an ongoing agreement with the landlord, they retain the right to continue living in the rental property when it is sold.
Can I evict tenants in order to sell a property?
If your tenant is protected by the Tenancy Agreement, then you should wait until after their contract is up in order to be able evict them and sell the property vacant.
If you’d rather sell the property without tenants you can evict a tenant by serving a valid Section 21 Notice under the Housing Act 1988 once a tenancy term has ended or if an appropriate break clause is used to end the tenancy early. As a landlord you must give a minimum of two months’ notice to your tenants before eviction.
How to sell a tenanted property
Selling a tenanted property is very common and most landlords choose to sell their property with sitting tenants. There are two main ways to sell a tenanted property:
- To sell ‘subject to the tenancy’
Selling your property subject to the tenancy works the same as a regular vacant property sale, except that the Tenancy Agreement will need to be transferred to the buyer’s solicitor before completion. The buyer then becomes the new landlord to your tenants.
- Sell with ‘vacant possession’ on completion
When selling a property with vacant possession, you must ensure that you and/or your tenants
- vacate the property on the day of completion as specified in the contract
- remove all belongings from the property except those items which are part of the agreement such as white goods or furniture as set out in the Memorandum of Sale.
Advantages of selling a property with tenants
Selling a tenanted property has its advantages, especially for the landlord buying the property. So, if you’re looking to sell your property on the open market, be sure to highlight these advantages in order to attract buyers.
- Reliable and instant rental income: Some landlords look to buy properties with sitting tenants to ensure a reliable income, as they won’t have to source new tenants and can enjoy immediate access to the rental income.
- Already vetted tenants:The next landlord has the reassurance that the tenants already know how to look after the property and abide by the rental agreement. It also saves the landlord from having to investigate the tenants’ payment history, occupation, references and deposit protection scheme.
- No set-up costs:Buying a property subject to the tenancy saves the new landlord from having to find tenants, conduct credit score checks and write up a new tenancy agreement. This is especially beneficial in areas where the rental property market is slow, or if the landlord needs to generate an income quickly.
- Avoid estate agents:If a landlord purchases a property with the tenants in situ, there’s no need to enlist an estate agent to advertise it on the rental market. This saves on estate agent fees, the cost of drafting up new paperwork and time spent having to find a deposit protection scheme.
- Reduce financial loss:Rental properties in some areas can take several months to sell, which could result in a loss of income if the property is empty for this time. By selling with sitting tenants, the current landlord is guaranteed equity until the sale completes.
Maintaining a good relationship with your tenants
You must give your tenants the appropriate notice of viewings, which is outlined in their rental agreement (this is usually 24 to 48 hours).
When selling your rental property with tenants, it’s important to have and maintain a good relationship with your them in order to make the selling process easier and smoother for you both.
Be considerate when arranging viewings
You must give your tenants the appropriate notice of viewings, which is outlined in their rental agreement (this is usually 24 to 48 hours). However, your tenants do have the right to refuse entry if the time is inconvenient for them, so it’s important to be respectful and reasonable with viewing times, for example, try not to arrange early weekend viewings, in order to ensure they don’t become frustrated and refuse.
Dealing with the buyer
When you do find a buyer, a solicitor should be appointed to transfer the contracts – the buyer should also be informed of the tenants’ current status – for example, if their rent payments are currently up to date.
The deposit should also be transferred, which is a relatively simple process, especially if a solicitor is involved. The new buyer will have to register for the scheme the deposit was payed under and it will then be moved to their account, ready for the tenants if they should choose to leave after their contract is up and they do not renew.
When all of this is complete, the new landlord (the buyer) must notify the tenants of the change to comply with Section 3 of the Landlord and Tenant Act 1985. They will provide them with their own details, new rent amounts, contract length, contact information, etc. This will usually be done in writing through a Section 48 notice. By this point, you have sold your home, and the property and rental agreement is no longer your responsibility.
Advice for buying a house or flat with tenants
Once you’ve bought a house with sitting tenants, you become the new landlord. Therefore, it’s a good idea to get new tenancy agreements written up as soon as possible after purchase. This new contract will reflect the change in ownership and any other adjustments, like tenancy length and rent amount. You should also write a formal letter to the tenants informing them of the change of landlord and giving details for the payment of rent.
Your rights as a tenant
Your landlord can only conduct viewings if it’s authorised in your tenancy agreement and if he’s given you notice in writing no less than 24 hours before.
If you’re reading this as a tenant and your landlord intends to sell their rental property but you want to remain a tenant, you may be concerned about your rights after the sale. The fact that a landlord wants to sell does not entitle them to evict tenants without cause. They also don’t have the right to show prospective buyers around whenever they want.
How to handle viewings
Your landlord can only conduct viewings if it’s authorised in your tenancy agreement and if they have given you notice in writing no less than 24 hours before. Even if your tenancy agreement does allow for viewings, you can refuse to show a prospective buyer around the property if it’s at an inconvenient time.
What happens after the sale
Once the property is sold, the purchaser will become the new landlord. Just as your original landlord was not entitled to evict you without cause, the new landlord has no right to do so either. Your existing tenancy agreement will still be valid, even though the landlord has changed. If you paid a deposit to the former landlord, arrangements will be made for those funds to be transferred to the new landlord.
Selling with tenants can be challenging, but if you have a good relationship with your renters and other landlords are searching for inhabited properties on the market, it can be a good way to guarantee a quick house sale.