Selling a Property with Tenants in Situ

04 October 2018

If you own a rental property which is tenanted and you want to sell this, then you could consider selling it with the tenants still living there. This is called selling with tenants in situ and there are some important factors that you'll need to consider before taking this route.

Selling a property with tenants in situ can be appealing for a number of reasons. Firstly, it can take several months for the sale of the property to complete particularly if you have to serve Notice to Quit and wait for your tenants to leave, or you may be selling a property occupied by protected tenants where vacant possession will be difficult to obtain, and by selling with the tenants in situ, the property will not be empty during this time. This means that you will continue receiving a rental income while the Conveyancing is ongoing. Alternatively, if the property is empty during this time then you would be liable for covering any mortgage payments, utilities and other expenses without this income.

For more information on what's involved in selling a house and how long this process can take, see our 10 Step Guide to Selling a Property.

In addition, if you want to market the property to other landlords, then it can be a selling point to already have tenants in place. When buying a property with tenants in situ, the buyer can avoid spending time and money finding new tenants to move in after their purchase has completed.

Selling with Vacant Possession

When selling a property on the open market, the contract will usually incorporate the Standard Conditions of Sale and it's common for the sale to be on the basis of "vacant possession." This means that those living in the property will have vacated by the time the sale completes. If you are selling the property with vacant possession, then it will not be possible to sell with the tenants in situ.

You will need to give your tenants sufficient notice to vacate the property before the sale is due to complete. Details of the notice period that you need to give will be set out in the terms of the tenancy agreement, but typically this is 2 months. If you don't serve notice in plenty of time, then this could end up delaying the completion of the sale.

If your tenants are receiving housing benefits and as such need to be rehoused by the local council, then it's important to allow plenty of time for this. Some local authorities require notice to be served to tenants before they will look to rehome them.

Selling with Tenants in Situ - Points to Consider

As you can see, selling a property with tenants in situ might not be the most straightforward approach to take. If you do decide to sell your property with tenants in situ, there are some important points that you should consider beforehand.

1. Narrowing the market

By selling with tenants in situ, you will be marketing the property exclusively to the buy to let market, ruling out anyone who is looking to buy a home to live in. This is likely to narrow the market considerably and could mean that the property takes longer to sell or sells for less as a result.

2. Arranging viewings

An important factor to bear in mind is that while the property is being marketed and viewings are taking place, the tenant's rights will need to be considered.

You should check the terms of the tenancy agreement to see if there is a clause regarding the tenant allowing viewings. If there is no clause then you will need to rely on the tenant's goodwill. Either way, they will need to be given sufficient notice of any viewings that are booked.

3. The tenant could serve notice

Of course, while the Conveyancing process is going on, the tenant could decide that they want to move out. If you have already accepted an offer on the property on the basis of selling with the tenant in situ and then they decide to leave, then this could give your buyer second thoughts.

Furthermore, the property may then sit empty for some time after all, which is likely to incur additional costs for you.

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