Whether you purchased a property as a buy-to-let or decided to rent it out at a later point, many landlords decide to sell a house with tenants in situ. In fact, the National Landlords Association’s latest research on the subject shows that a fifth of its members intend to reduce the size of their property portfolio, representing the highest level of planned sales in a decade. If you’re thinking of following suit, read our practical guide to selling a house with tenants.
What is a sitting tenant?
First off, it’s important to clarify what we’re discussing here. A sitting tenant is a renter who is already occupying a property. Provided they have an ongoing contract in place with their original landlord when the house is sold, they are legally entitled to continue living in it.
The benefits of selling a house with tenants as a buy-to-let
Selling a house with tenants in situ can certainly have its upsides, particularly if it’s sold as a buy-to-let property (i.e. sold to another landlord). Provided you have a good relationship with your existing tenants – with no major ongoing disputes or history of unpaid rent – this arrangement can be beneficial to all parties:
- The current landlord won’t suffer any loss of income, as they’ll continue to receive rent payments up until the date of completion
- The new landlord doesn’t have to worry about spending time and money on finding new tenants, so they will start earning rental income as soon as they take ownership of the property. For this reason, the property may fetch a higher price when sold
- The existing tenants don’t need to move out of the property. The rental agreement is simply transferred to the new landlord, with all the terms remaining in place for the length of the tenancy
For more on this, read our article on why you should sell your apartment with tenants in situ.
Selling to other types of buyer
Things can become a little more complex if you’re not selling to another landlord – although this certainly doesn’t mean that you shouldn’t consider doing so in the right circumstances. When you list your property on the market, anyone – not just fellow landlords or investors – will be able to see it, so if you’re open to the possibility of selling to a non-landlord, you’ll have a much larger pool of prospective buyers. In this section, we’ll discuss some of the considerations around selling a house with tenants to someone who wants to live in the property.
Can you sell to your tenants?
While not always practical, the simplest solution may be to sell your property to the existing tenants. Of course, many people rent because they don’t have enough money saved up to secure a deposit, or because renting better suits their circumstances. But it’s possible that your tenants are looking to buy in future. If they love living in your house, they can escape the hassle of finding a new property and moving out by buying it themselves. What’s more, this means you don’t have to deal with any potential complexities around asking them to leave. Whether or not your tenants prove to be in a position to buy, it’s absolutely worth discussing it with them.
What rights do your sitting tenants have?
Unless you’re selling to another landlord or your existing tenants, you will need to serve them with notice to vacate the property. The process for achieving this varies depending on whereabouts in the UK the house is located.
In England and Wales, the most common form of tenancy agreement is an assured shorthold tenancy (AST). Your agreement will almost certainly be an AST, provided:
- The original tenancy started on or after 28th February 1997
- You’re not sharing the accommodation with your tenants (i.e. you live elsewhere)
- The rent is less than £100,000 a year
- Tenants are individuals (ie not a company)
If an assured shorthold tenancy is in place, you’re entitled to give notice to your existing tenants by issuing a two-month Section 21 notice (there are several variables that can effect when this notice can be served and these will be detailed in the terms of your tenancy agreement). Various other requirements are placed on the landlord, such as ensuring that you provided a copy of the Energy Performance Certificate to your tenants. Read the UK government’s guidance on evicting tenants for more information.
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Arranging viewings while your tenants are in situ
As a landlord, you’re not simply able to demand access to a tenant’s house at the drop of a hat. Prospective buyers will understandably want to look around the property, which can create a challenge if your tenants are uncooperative. You may have included a right to conduct viewings in your tenancy agreement, if this is the case you will be required to give your tenants 24 hours’ written notice prior to the viewing taking place.
Unsurprisingly, things become a little more complicated if no such arrangement exists within your rental agreement. In this case, you’ll only be able to show potential buyers around with the express permission of your tenants. Hopefully, your relationship with your tenants will be good enough that they won’t object to viewings. If they do refuse, your best option is to reach a compromise – perhaps by offering to discount their rent for a month to make up for the inconvenience.
Ready to sell your home? Take the first step by requesting a free, no-obligation property valuation today!
Correct at time of publication (20th November 2018). The views and opinions expressed herein are those of the individual contributor and do not necessarily reflect those of the Chancellors Group of Estate Agents Ltd or its subsidiaries. References to legislation, best practice and other matters with legal implications such as fees, rules and processes are included for information and editorial purposes only and are not authoritative, nor should they be interpreted as advice. When in doubt you should only take advice from an industry professional or solicitor where appropriate. E&OE.