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Selling a House with Sitting Tenants – The Ultimate Guide

Our latest guide looks at the in’s and out’s of selling a house with sitting tenants in situ. First we explore the various routes to sell a rented property. We then look at the key differences between ‘Assured Shorthold’ and ‘Protected’ tenancy agreements and what this means to you as a landlord. Finally, we look at the rights as a tenant who is faced with a landlord looking to sell their property.

If after reading our guide you still have questions, please feel free to post these at the foot of this page and we’ll be more than happy to help.

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What is a sitting tenant?

Put simply, a ‘sitting tenant’ is someone who lives in situ at the point at which a landlord sells and transfers ownership of a property to another landlord. There are however key differences between types of tenancy agreement that can make selling a house with sitting tenants complicated.

sitting tenant

The key difference between ‘Assured Shorthold’ and ‘Protected’ tenancy agreements

A landlord has greater rights under an Assured Shorthold tenancy agreement than they do under what is termed a Protected tenancy. The main difference is that under a protected tenancy the tenant has the right to live in situ until such point as they pass away. In other words, under a protected tenancy, the landlord cannot serve a notice to vacate the property at any point. This makes it very difficult to sell on the rented property as most buyers want the freedom to be able to sell the property at some point in future. Under a protected tenancy the tenant is also able to pass their tenancy onto a family member with the same tenants rights. And so protected tenancies are only ideal if you know for sure that you never plan to sell a rented property.

How changes in tenancy law led to a boom in Buy to Let property

Selling a rental property with a protected tenancy is always going to be more difficult. This is mainly because most mortgage lenders won’t lend against this type of tenancy. The reason is that the lender has far less rights to recover the property in the event the mortgage isn’t paid. Protected tenancies were only available until 15 January 1989 at which point the assured shorthold tenancy was immediately passed into law. Critically, this is what led to the boom in what is now termed ‘Buy to Let’. This is the point at which mortgage lenders began to take a real interest in lending to new landlords as a new route to growing their business rapidly.

Selling a rented property with an assured shorthold tenancy agreement in place is a much more straightforward process. An assured shorthold agreement allows a tenancy to be brought to an end swiftly by serving a Section 21 Notice to evict tenants. The normal timeframe for the notice period is just two months. However, with the recent Covid-19 pandemic, government put new measures in place to prevent the risk of greater levels of homelessness. Initially this was set at 6 months notice under what was termed the ‘Tenant Eviction Ban’. However, this term was then reduced, (June 2021) with a minimum 4 month notice period now in place to protect tenants.

Selling a property with tenants in situ

There are just two ways of selling a tenanted property. While this may sound straightforward there are many things to consider.

Selling with tenants in situ

Provided you’re able to find another landlord wanting to buy a rental property with tenants in situ this could be a great way to sell. Professional landlords often look for a way to buy tenanted properties that already have a tenancy in place. This can help avoid the extra costs of having to find a new tenant while also having the property empty and a mortgage having to be paid.

However, landlord demand can fluctuate wildly as a result of mortgage lending and ever-changing government legislation. In recent years there’s been a large increase in the number of landlords that have decided to retire or sell up. This could affect your ability to sell your tenanted property.

Evicting tenants and selling with vacant possession

Provided you’re able to obtain vacant possession, this is often seen as the best way to sell a property. Effectively it means your property can be purchased by anybody looking for a place they can call home. Most importantly, by selling with vacant possession you’ll be able to prepare your property and control it’s appearance throughout the entire marketing and viewing period. You won’t have to worry about tenants leaving the property untidy or worst still – messy.

But to get to this point could take some time if you’re not prepared. It’s incredibly important that you have a good relationship with your tenants. First you’ll need to ensure that you have a current and signed tenancy agreement that could stand up in a court of law should it be necessary. This is in case your tenants decide to make things difficult by not simply leaving the property. If this does happen you’ll need to ensure that all of the prescribed documents were served correctly at the start of the tenancy. This will include a valid gas safety certificate, electrical safety certificate and energy performance certificate. Aside for these you’ll also have to demonstrated that any deposit was registered within a government approved scheme on time.

This is particularly the case right as a result of the tenant eviction ban under Covid-19 regulations. As stated previously, this ban effectively means that instead of the typical two month’s notice being issued, all UK landlord’s now have to serve a minimum four months. This one change has made selling a rental property all the more difficult as there is still no guarantee that tenants will leave after the four months. We talk about this more next.

Landlord advice

So, what are the options for selling a rented property with tenants in situ?

Estate agent sale


Selling via an estate may sound straightforward until you realise that not everybody wants to purchase a buy to let property with sitting tenants. The reality is that the vast majority of people are simply looking to buy a property to live in themselves. This means that the pool of willing buyers is often reduced meaning only a handful are looking for an investment property. In our experience when a landlord instructs a high street agent to sell their rental property with tenants in situ they often find it very slow or even impossible to sell. If you do decide to sell via an estate agent be careful to ensure that your chosen agent has experience in selling buy to let houses.

Advantages

  1. Some agents have landlords registered looking to buy rental properties
  2. Provided there is strong buyer demand, you could get the best price for your property
  3. With hard-earned experience, estate agents can often provide accurate valuations
  4. You remain in control from receiving the memorandum of sale right through to exchange of contracts. This means you are free to withdraw from the sale at any time should you have a change of heart.

Disadvantages

  1. Selling via an estate agent it can prove slow to find the perfect landlord buyer
  2. Once a sale is agreed it can take an average of 3 – 6 months to complete the sale
  3. There is always the risk that a buyer will pull out within any part of the property chain
  4. Most buyers are looking to buy a vacant property making it difficult to find the perfect buyer

Selling a rental property at auction

Selling a rental property via an auction is perhaps the most exciting route of all. But with this excitement comes a great deal of uncertainty. And so it’s not for the feint hearted. Success in an auction room all depends on who turns up on the day of the sale. The more buyers that attend, the better the chance is of selling a tenanted property for a good price.

Advantages

  1. Auction houses tend to draw in good numbers of landlords looking to add to their existing property portfolio
  2. Once the hammer falls the sale is legally binding for both buyer and seller
  3. You set the reserve sale price meaning your property cannot be sold for less
  4. Sometimes it’s possible to sell for more than you’d planned. It just depends who’s in the auction room on the day

Disadvantages

  1. Sale fees are generally higher at approximately 2.5% of the eventual sale price
  2. Selling via a house auction is not guaranteed. You could find that having waited a couple of months for auction day to arrive that you don’t find a buyer and are back to ‘square one.
  3. Once the hammer falls you are legally obliged to sell your rental property with no opportunity to withdraw from the sale

Selling a buy to let to a property buying company

With a raft of government legislation and taxation changes it’s easy to see why you may be looking for a company who buys tenanted properties. Afterall, the idea of buying and running a buy to let portfolio has lost it’s appeal for many.

This is where companies that buy tenanted properties come in. Selling an investment property with tenants in situ is now relatively straightforward. You can now sell your property in just a matter of days or weeks via a professional house buying company. This is done by simply selling for a trade price (cash) in return for a guaranteed quick sale. This works in the same way as selling your car via one of the we buy any car websites. Provided you choose well, your property buying company will help explain to your tenants how nothing will change apart from the ownership of the property.

Advantages

  1. No estate agent, valuation or solicitor’s fees at any stage of the sale
  2. No need to serve notice to your tenants as they are free to stay
  3. Greater certainty of a sale completing in just 7 days or 4 weeks (depending on situation)
  4. You can sell your property regardless of condition
5. Help with explaining the sale process to your tenants with a minimum of disruption

Disadvantages

  1. A reduced price for your property in return for a guaranteed sale

Landlord advice

Should I sell my buy to let?

Selling an investment property is a decision only you can make as we’re not allowed to give financial advice. We’d simply say that you should consider what else you could do with any surplus monies that would be received after a sale. If you can’t think of a better way of spending or investing it may be worthwhile leaving your investment where it is for the long term.

How much notice does a landlord have to give a tenant to move out?

As discussed earlier, up until the Covid-19 pandemic struck, landlords simply had to serve two month’s notice under a valid Section 21 Notice. However, as a result of Covid-19 the government brought new legislation into place under a new ‘Tenant Eviction Ban’. Initially this meant landlords had to give a minimum 6 month’s notice before they could then apply to courts for possession should their tenants not leave.

In June 2021 the minimum notice period was reduced to 4 months as the pandemic eased. As a result, courts now have a long backlog of possession cases to process and it’s predicted that it could be many months before a landlord’s case could be heard. This has made the process of gaining vacant possession of a rented property much harder than previous resulting in many landlords looking to sell with tenants in situ.

How much does a sitting tenant devalue a property?

This is a tough question as it’s very difficult to quantify the effect sitting tenants have on selling a property. Clearly if you have tenants signed under a protected tenancy agreement this is going to make selling more difficult as almost most lenders will lend to a new landlord under these circumstances. You’ll need to find either a cash buyer or discover how you could sell to a company that buys houses with tenants in place.

It goes without saying that selling a property with tenants in situ will always be more difficult than selling with vacant possession. Often it’s the effect sitting tenants can have during viewings that matters most. However, handled right, this needn’t be the nightmare that you might be expecting.

From our experience the main issues with selling a tenanted property boil down to how good a relationship you have with your tenants. For example, if you’ve always been difficult for your tenants to get hold of they’ll often remember this. And perhaps they’ll choose to ignore you when the time comes that you need their help. Conversely, if you’ve always been easy to reach and kept on top of maintenance issues when they were reported you’ll probably find your tenants are more than willing to help. They may even go out of their way to help ensure your property is always presentable in the run up to viewings. This will only ever be the case if you get them on side from the outset.

What happens when you sell a buy to let property?

Selling a buy to let property is much the same as selling any other property. The only real difference is if you have the complication of sitting tenants. If this is the case it’ll mean you having to give serious consideration as to how you’re going to tell your tenants that you intend to sell the property. This is best done by being honest and open from the outset explaining your reasons for selling. You may even find during this conversation that your tenant is interested in buying your property. This could be the perfect answer for both sides.

Can a sitting tenant buy the property?

This is certainly possible and happens surprising regularly. If you are considering selling your rental property with tenants in situ we’d always recommend that you do first offer the sale to them. Provided your tenants are able to put together a deposit and evidence a mortgage in principle this could be your best route to sell with the minimum of hassle for all. You’ll also benefit from no estate agent fees. What’s more, your tenants will have already settled in the property and will be more than willing to ensure your sale runs smoothly. For them there would be no change and they may even benefit from a reduction in their monthly outgoings as any mortgage is likely to cost less than the monthly rent.

Tenant’s rights and advice

tenants rightsWhat happens if my landlord wants to sell the property?

In reality should your landlord decide to sell the property there is very little that you can do. Provided the property is in reasonable condition and has been marketed at a fair price it’s often just a matter of time before a sale is agreed. If your landlord does decide to sell (and you have an assured shorthold tenancy agreement), they will need to serve you with a valid Section 21 notice to vacate the property. This notice would typically give you a minimum two month’s notice to find alternative accommodation. However, at present, under Covid-19 regulations there is a current tenant eviction ban in place meaning a minimum 4 month’s notice must be served by your landlord.

If you are in a position to buy your landlord’s property there is no harm in asking how much they are looking to sell for. You may find this the best solution as it’ll avoid you having to find an alternative property and arranging another house move. You may even be able to negotiate a small discount on the purchase price as your landlord will save money not having to use an estate agent.

What are my rights as a tenant if my landlord wants to sell?

As a paying tenant you have a number of tenant rights. As we’ve stated above, if you live under a protected tenancy your landlord cannot force you out of your property. You have full protection from this. Your landlord can still sell the property but only with yourself remaining as the protected tenant.

Your landlord has to give a minimum 24 hour’s notice of any intended visit to the property. This could include any person needing to visit to carry out maintenance works or indeed viewings. Under the terms of your tenancy agreement you’ll also have the right to quiet and peaceful enjoyment of the property. This means that neither your landlord or anybody else can simply turn up at your property unannounced. Aside from these two main rights as a tenant you won’t be able to hold back the eventual sale of the property.

Can I refuse viewings as a tenant?

You are able to refuse viewings on the grounds of an illness or other pressing issue. However, it will have been written into your tenancy agreement that your landlord has the right to visit the property provided they give you a minimum 24 hour’s notice. This means that eventually you will have to provide access and for this reason we’d advise against making it difficult for your landlord.

In summary

We know that selling a house with sitting tenants is never going to be straightforward. However, by taking the time to fully understand your legal rights and the key differences between tenancy agreements this can make things clearer.

Want to find out more about how to sell a house with tenants in situ?

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