Many of the steps involved in selling a rental property will be the same as if you were selling your main residence, but there are a few important points to consider when selling a rental property. We have put together a step-by-step guide of what you'll need to do in order to sell your rental property.
1. Notify Your Mortgage Provider
If you have a mortgage on your rental property, it's important to notify your mortgage provider as early as possible of your intention to sell. Ask your lender for a settlement figure or balance and let them know whether you intend to transfer the mortgage over to a new rental property, or if you plan on settling the mortgage with the proceeds of the sale.
2. Decide Whether to Sell with Tenants in Situ
If your property currently has tenants in it, then you'll need to decide whether to serve your tenants notice and sell with vacant possession, or sell with tenants in situ. There are benefits and risks associated with both of these options, so it's important to weigh these up carefully before making a decision.
While selling with tenants in situ may be appealing to some landlords, the tenant will still have the right to quiet enjoyment of the property during the sale. This can result in potential access issues for maintenance and viewings of the property.
Another point to consider is that by selling with tenants in situ, you will be narrowing the market to just buy-to-let landlords, and excluding anyone who may want to buy the property to live in. If the property is in a popular rental area, then this may play in your favour and a potential buyer might consider it appealing to buy with tenants in situ.
For more information, see Selling a Property with Tenants in Situ.
If you decide to sell with vacant possession instead, then your tenants will need to be given the correct notice to vacate the property before the sale completes.
3. Instruct an Estate Agent
While it's not a legal requirement to instruct an estate agent to sell your property, many people do choose to do so. If you do decide to instruct an estate agent, make sure that you compare the valuations, fees and services of a few different estate agents before selecting the right one for you. You may also want to consider choosing an agent that specialises in rental properties.
4. Prepare the Property for Sale
This is one area where it becomes trickier with a rental property than with your main residence, particularly if it's tenanted.
As with any property sale, you'll want to ensure that the property looks its best before it's marketed for sale. If this involves giving the property a lick of paint, then you'll need to arrange access with your tenant. Redecorating a property while someone is living there can be very disruptive for them, so you'll need to think carefully about the logistics if you do want to do this.
You'll also need to rely on the goodwill of your tenant when it comes to viewings. While you'll obviously want the property to look its best, it's important to remember that this is still their home and they have the right to quiet enjoyment of the property. You will need to provide sufficient notice before any prospective buyers visit the property and the cooperation of your tenant is crucial here.
If you are selling with tenants in situ, and consequently are only marketing to buy-to-let landlords, it can be worthwhile ensuring all the mandatory rental documents are already in place and up to date. This includes the EPC, gas safety certificate, and electrical safety certificates, for example. You can also prepare financial information showing income and outgoings, so that potential buyers can calculate the property yield.
5. Instruct a Conveyancer
Once your property is on the market, it's a good time to get a Conveyancing quote so that you can instruct a Conveyancer. Once you've instructed your Conveyancer, they will send you some initial paperwork to complete, such as the Property Information Form and the Fixtures, Fittings and Contents Form. If you get this paperwork completed and returned while you're property is still on the market, then this will help to speed things up once you've accepted an offer.
For more information on how to pick the right Conveyancer for you, see Top Tips for Choosing a Conveyancer.
6. Accept an Offer
When you receive an offer for your property, you'll need to consider whether or not to accept this. As well as the value of the offer, you'll also want to consider the prospective buyer's position (are they part of a chain, for example, and has their mortgage been approved in principle?)
It's also worth discussing prospective timescales at this point, to establish whether you're aiming for a similar date.
If you are happy to accept the offer, then communicate this to your estate agent who will pass the news on to the buyer.
7. Agree a Completion Date and Exchange Contracts
Once you have accepted an offer, the buyer will need to instruct their own Conveyancer, who will carry out all of the legal work associated with the property purchase. They will carry out searches and request details from your Conveyancer.
The contract of sale will then be drawn up and copies sent to both you and your buyer to sign. Once all outstanding queries have been dealt with and a completion date has been agreed, contracts will be exchanged. This is the point at which the sale becomes legally binding.
After contracts have been exchanged, the property transaction will complete on the agreed date, and ownership of the property will pass to your buyer. If you are selling the property with vacant possession, then the tenants will need to have moved out and all furniture and possessions removed from the property by this date (unless you have agreed with your buyer to leave any items). It's therefore very important to consider your tenant's notice period before agreeing a completion date.
At Co-op Legal Services we offer a No Sale No Fee Guarantee, meaning that if a buyer withdraws before exchange of contracts, you won't pay any of your legal fees.
8. Understand Capital Gains Tax on Rental Property Sales
It's important to note that if you sell your rental property for a profit, then you may be liable to pay Capital Gains Tax on this profit.
What's more, if the rental property that you're selling was previously your main residence, then your Capital Gains Tax liability could be set to increase in 2020. This comes as a result of plans revealed in the 2018 autumn budget announcement to implement changes to the way Capital Gains Tax is applied on rental properties.
For more information, see Capital Gains Tax to Increase on Rental Property Sales.