Selling a property with tenants in the UK
If you’re a landlord looking to reduce your portfolio, you may be considering selling property with sitting tenants – or selling with tenant in situ as it’s known. There are pros and cons to doing this and it’s worth understanding your options before you start. We look at the main things you need to consider.
If you’re a landlord looking to reduce your portfolio, you may be considering selling property with sitting tenants – or selling with tenant in situ as it’s known. There are pros and cons to doing this and it’s worth understanding your options before you start. We look at the main things you need to consider.
Your options when selling a tenanted property
You have two main options when selling a rental property with tenants:
1 Ask your tenants to leave the property and sell it with vacant possession
As long as your tenants are no longer in the fixed term of their tenancy, you can serve them notice to vacate the property using Section 21 of the Housing Act 1988.
If everything goes to plan, you will have an empty property to sell to whoever you like. However, selling homes can take some time and you will need to factor in the loss of rent during the sales process.
2 Sell the property with tenants in situ
You can also sell the property to another landlord, while it is occupied by your tenants. This will limit the market to buy-to-let landlords. However, it means there will be no loss of rental income while the sale goes through – a benefit for you and to the prospective buyer.
Another option is to sell to your tenants, if they like the home and are in a position to buy.
Do you actually want to sell a tenanted property?
While things may go smoothly, selling property with tenants does have its potential pitfalls, so give careful consideration to why you want to sell and whether this the right time.Selling with tenants in situ – points to consider
Some things to think about are:
- Is now the best time to sell – what are the market conditions like?
- Is there a market for tenanted properties in your area – do your research and work out the likely rental yield.
- Can you afford to cover the mortgage while you sell, if your tenant decides to leave?
- Do you have a good relationship with your tenant, will they be amenable to accommodating viewings?
- What are your reasons for wishing to sell – trying to offload a problem tenant onto someone else could backfire as the type of buyers you are likely to attract will thoroughly check out any tenant they are taking on.
Legally repossessing your property
If you decide to gain possession of your property first, you will need to following the legal process. The best way is likely to be a Section 21, no-fault eviction. Read full details of how to do this on the gov.uk website.
Be aware that the government pledged to end Section 21 evictions during the course of this parliament, so check the gov.uk website for the latest information first.
Notifying your tenant of the sale
As a courtesy, contact you tenants well in advance and explain what is happening. If you intend to repossess the property first, explain your reasons for wishing to sell – this would be the point to give them the chance to make an offer if they want to do so.
If you are selling the property with tenants in situ, again explain why you need to sell and reassure your tenants that you will be selling to another landlord, so there is no reason why anything about their tenancy should change.
It is a good idea to be open and honest with your tenants, getting them onside will definitely help viewings go more smoothly.
Can you demand more money for your property with tenants in situ?
This really depends on the market conditions in your local area – if there is high demand for buy-to-let properties or if finding good tenants can be tricky. Theoretically, you ought to be able to command a premium as a property with ready-made – and hopefully reliable – tenants will save the buyer money and stress.
However, taking on someone else’s tenants will always be a bit of a lottery and the sort of experienced landlords your property is likely to attract may strike a hard bargain.
Scheduling and arranging viewings
Check your tenancy for any clauses about viewings – if there aren’t any you may need to rely on your tenant’s goodwill. Remember that landlords need to give 24 hours’ written notice to tenants before any visits to the property – and need their permission. Try to be considerate about arranging viewings at reasonable times – giving the tenants the chance to go out if they prefer. Some landlords offer incentives, such as rent reductions, to sweeten the viewings period.
Paperwork and changing the tenancy agreement contract
If you’re selling the home with tenants, use a conveyancing solicitor with experience of the tenants in situ process. Once you have completed on the sale, they will ensure that the new owner automatically takes over as landlord. While this removes your obligations to the tenants, the assured shorthold tenancy agreement remains in place, even though it still contains your name and details.
Transferring the tenancy deposit
When your tenant moved in, you will have placed their security deposit in a government-backed scheme. As part of the sale process your conveyancing solicitor will have arrange the transfer of the buyer’s name to the deposit scheme you are using. For additional peace of mind, it may be worth contacting the scheme to check this has all gone smoothly.
Completion and apportioning rent
It is usual to set the completion date for the day on which the rent is due – so there is no need to move rental payments between seller and buyer.
If this can’t be done, your conveyancing solicitor will make arrangements to apportion any rent due to the buyer and ensure it is paid.
If you are weighing up whether to sell a property with tenants, we’d be happy to offer advice.
Call Allen Residential for more information on 01761 412300
