A Guide to Selling a Property with Tenants in Situ

Can you Sell A Property With Tenants In Situ?

Yes, a landlord can sell a property with tenants in situ. However, the sale of the property does not end the tenancy; rather, the buyer takes over as a new landlord. These kinds of property sales are quite common in the investment market, as some investors seek to reinvest the money from the house sale, and other investors are looking for a buy-to-let property that already comes with an income stream. Unlike selling your own private property, selling with tenants in situ requires balancing your needs with the rights of your tenants.

As the new Renters Rights Act will abolish Section 21 and assured shorthold tenancies, more landlords will likely be choosing to sell their properties with tenants in situ. New landlords will not have any more rights to evict tenants than the old landlord, and will be bound by any protected tenancy that is less than 12 months old. They will have to give 4 months’ notice if they wish to take possession of the property and cannot raise the rent above market rates.

Benefits and Drawbacks of Selling With Tenants

There are several pros and cons of selling a property with tenants in situ that you should consider carefully before making a decision.

Pros 

• You can start the selling process faster, as you won’t need to evict your tenants first.

• You will also receive rental income right up until the property changes hands, so you won’t need to deal with a void period.

• Selling a well-managed property with tenants in situ can be very appealing to new landlords and buy-to-let investors, as the rental yield is proven, making for a good investment.

• If you are selling an empty property, you may have to invest time and money in redecorating. But if you’re selling the property with sitting tenants, you can leave it as it is and save money. 

Cons

• If you are selling a property with tenants in situ, your potential buyers will be limited to other landlords, thus reducing your potential pool of buyers and possibly a lower selling price.

• Your tenants may not be amenable to house viewings, as they may feel uncomfortable about their home being sold and could be reluctant to allow access, which could devalue the property or make it harder to sell.

• Problem tenants can adversely affect the sale, especially if there are any rent arrears or ongoing disputes between the landlord and tenant.

• There is more admin and paperwork required when selling a property with sitting tenants, as the tenancy agreement, EPC, gas safety certificate and other documents will need to be transferred to the new owner by the conveyancing solicitor.

Legal Responsibilities When Selling

You must honour the existing tenancy agreement and transfer all legal rights and responsibilities of being a landlord onto the new owner, including deposit protection, maintenance obligations, and ongoing lease terms. 

If you provide the property with furniture, you will probably need to include the furniture in the sale. You will need to provide potential buyers with an inventory of all items within the property and agree on a price for them. 

You will need to have all tenancy paperwork up to date and ready to transfer to the new owner, including the evidence of the tenant’s Right to Rent, the current tenancy agreement, certificates showing that the gas and electric installations are safe, an EPC certificate showing the energy efficiency of the property, and details of the deposit protection scheme. If there are any ongoing disputes between you and your tenants, scheduled maintenance work or any legal notices served to the tenant, all of these will need to be provided to the new owner.