Buying a Property with Tenants in Situ

28 June 2018

In England and Wales, buying a property which is occupied by residential tenants means that while the ownership of a property changes, the tenants living in the property remain in place. This is ideal for someone who wishes to purchase a buy to let and wants to begin earning rental income straightaway.

With or Without Vacant Possession

Whether or not you buy a property with tenants in situ will be set out in the standard conditions of sale. The sale contract will either state that the property will be sold 'with vacant possession' or it will be sold subject to the tenancy, which means without vacant possession.

With Vacant Possession

If a property is to be sold with vacant possession, then the owner and/or the tenants must no longer be living there, come the day of completion. You may have agreed that certain items will be left by the owner, such as the white goods, carpets and curtains, but otherwise the property must be empty.

If the property is occupied by tenants but you are to be given vacant possession, they must be given the necessary amount of notice to quit, which is typically two months in England and Wales. This means that you will not be able to complete your purchase until the tenants have moved out of the property. If the tenants have not left at the end of the notice period the next step is for the seller - as the landlord - to begin possession proceedings through the Courts.

Without Vacant Possession

On the other hand, if a property is to be sold without vacant possession, it means that the tenants, the furniture (if it is furnished) and any other items can remain in the property once ownership has changed hands.

If the new owners intend to rent the property out anyway, then this can be highly beneficial, as they will not need to evict the existing tenants and find new ones. Instead, they can begin drawing rent from day one.

How to Buy with Tenants in Situ

If you wish to buy a property with tenants in situ, you need to instruct a conveyancer with commercial experience. Extra care is needed as, in addition to the standard enquiries that need to be made in all conveyancing transactions, it is critical to make enquiries about the tenants. This makes it a little different from other kinds of conveyancing transactions.

For example, the seller must provide all the details relating to the tenancies, including the Tenancy Agreement to establish when the tenancy was created, the status of the tenants and how they may be regulated by legislation, as different forms of security of tenure apply. There's also a whole range of other legal and safety issues to attend to, such as:

  • Checking the original deposit has been registered and transferring it to your name
  • Checking the property meets safety regulations
  • Checking all the necessary certificates are in place, such as energy performance, gas, boiler and electrical
  • Checking all electrical appliances have had a Portable Appliance Test in the past year
  • Checking (if furnished) that the furniture is in an acceptable condition and meets safety standards
  • Organising the payment of rent
  • Organising new Tenancy Agreements, as and when required
  • Taking an inventory.

Should I Buy with Tenants in Situ?

Because there can be so many things to organise, some buyers prefer to buy a property with vacant possession and find new tenants when everything is ready. This is particularly true if the property is in desperate need of refurbishment or does not comply with safety standards.

However, if you are looking to buy a
property with a view to renting it out, buying with tenants in situ can be advantageous. First and foremost, you will not have to find new tenants, and you can start receiving rent as soon as you have completed the conveyancing process.

So there are pros and cons to buying a property with tenants in situ, and the right option for you will depend on your personal circumstances. But if you do wish to buy with tenants in situ, be sure to check with your Conveyancer first, as this will ensure the necessary due diligence is carried out. This will help to protect you, your investment, and your prospective tenants.

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