Selling a Rental Property with Sitting Tenants: Key Considerations
If you own a rental property that is currently occupied and are considering selling, you may have the option to sell it with the tenants still in place. This is commonly referred to as selling with "tenants in situ." Before proceeding, it’s important to understand the legal and practical implications of this approach.
Why Sell with Tenants in Situ?
There are several advantages to selling a property with existing tenants. The sale process can take time, and if you need to serve notice on your tenants before selling, this could extend the timeline significantly. Additionally, certain tenancy agreements, such as those with protected tenants, may make obtaining vacant possession more complex. By selling with tenants in situ, you can continue receiving rental income throughout the conveyancing process, helping to cover mortgage payments, utilities, and other expenses that would otherwise fall solely on you if the property were vacant.
Furthermore, marketing a property with sitting tenants can be attractive to prospective buyers who are landlords. A ready-made tenancy arrangement means the new owner can generate rental income immediately, without the need to advertise for and vet new tenants.
If you're considering this option, it’s essential to review the terms of your tenancy agreements, consult with legal professionals, and ensure compliance with all relevant regulations.
For further guidance on the selling process, including timelines and legal steps, check out our Guide A Step-by-Step Guide to Property Transactions.
Selling with Vacant Possession
When selling a property on the open market, the contract typically includes the Standard Conditions of Sale, and sales are often agreed on the basis of vacant possession. This means the property must be unoccupied by the time the sale is completed. If you intend to sell with vacant possession, you cannot sell with tenants in situ.
To comply with this requirement, you must provide your tenants with sufficient notice to vacate before completion. The required notice period will be outlined in the tenancy agreement, but it is usually at least two months. Failing to serve notice in good time could result in delays to the sale process.
If your tenants receive housing benefits and require rehousing by the local council, it is crucial to allow extra time. Many local authorities will only begin the rehousing process once formal notice has been served. Planning ahead can help prevent complications and ensure a smoother transaction.
Selling with Tenants in Situ - Points to Consider
Selling a property with sitting tenants can present unique challenges. While it may offer advantages, such as ongoing rental income, it is not always the most straightforward option. If you are considering this route, here are some important factors to keep in mind:
1. Limited Buyer Pool
By selling with tenants in situ, you are primarily targeting buy-to-let investors, as the property will not be available for owner-occupiers. This can significantly reduce the number of potential buyers, potentially leading to a longer sale process or a lower sale price.
2. Managing Viewings
While marketing the property, you must consider your tenants' rights regarding viewings. The tenancy agreement may include a clause requiring tenants to allow access for viewings, but if no such clause exists, you will need their cooperation. Regardless, tenants must always be given adequate notice before any viewing takes place.
3. Risk of Tenant Leaving During the Sale
During the conveyancing process, tenants may decide to serve notice and vacate the property. If you have agreed to sell on the basis that tenants will remain, this could cause complications for the buyer, potentially leading them to reconsider the purchase. Additionally, if the property becomes vacant, you may face unexpected costs, such as mortgage payments and utility bills, until a new tenant or buyer is secured.
Selling a property with tenants in situ requires careful planning and an understanding of both legal and practical implications. Seeking legal advice early in the process can help ensure a smooth transaction.
If you would like some more information about the conveyancing process or a free no obligation quote, call us on 01685 37 37 21 for a FREE initial chat.