Selling a house with a sitting tenant29-09-2023 | Property Occupants
While it may seem a little complicated, you can sell a property with a sitting tenant, and landlord-landlord sales are quite common. However, it is also true that some buyers will have a firm preference for an empty property.
Selling your rental property can be a challenging and time-consuming process. You may have lived in it yourself in the past. Whatever your reasons are for cutting down your property portfolio, it’s important that you make your property as appealing as possible to potential buyers. So, how do landlords go about selling a house with a sitting tenant?
At CIA Landlords, we are specialists in landlord insurance. We have come up with ideas around selling a house with a sitting tenant.
What is a sitting tenant?
So, you’ve settled on selling your property but still need to figure out what to do with your tenants. Before we discuss the ins and outs of how to sell a house with tenants in situ, it’s important to understand what a sitting tenant is.
In short, a sitting tenant is someone who is currently renting a property whilst the landlord is trying to sell the property and transfer ownership to another landlord or buyer.
Sitting tenants’ rights in the UK
Every tenant in the UK has rights (and responsibility to the property) that landlords must respect. For instance, you cannot just turn up unannounced at your rental property once you let it out to tenants, you must first ask for sitting tenants’ permission at least 24 hours before a property inspection.
In 2023, tenants’ rights in the UK have been altered by a transformative piece of legislation for the rental sector called the Renters Reform Bill. We can’t really talk about sitting tenants’ rights in the UK without discussing the Renters Reform Bill, so let’s get into it.
Tenants can’t be evicted if the landlord wants to sell the property within the first six months of tenancy
Prior to the Renters Reform Bill, if a landlord wanted to sell the property at any point, they just needed to provide the tenants with a 2-month warning. However, the new legislation aims to somewhat strengthen the position of sitting tenants. With the new legislation, tenants can’t be served with a notice to vacate the property within the first six months of the tenancy if the landlord wants to sell it.
Tenants will no longer be served with ‘no fault evictions’
‘No fault evictions’ had gained a bad reputation because many believed they allowed landlords to repossess their property without providing sufficient explanation or warning to sitting tenants. The Renters Reform Bill requires landlords to give sitting tenants an explicit reason for repossessing the property. Previously, a section 21 notice to end an assured shorthold tenancy (AST) meant a landlord could repossess the property without proving any ground for possession.
The right to have a periodic tenancy
After the new bill, only periodic ‘rolling’ tenancies will be allowed. So, that means an end to assured shorthold tenancies with fixed dates. With a periodic tenancy, you can still provisionally agree to a ‘move-out’ date with a landlord to end the tenancy. The rental agreement essentially runs from month to month. But tenants need to provide at least 1 month’s notice to end a monthly rolling contract.
The ability to look up a landlord on a national landlord register (coming soon)
The new bill also proposes setting up a new national landlord register. This will enable tenants to look at relevant information on landlords in an online portal.
Let’s look at some tips on selling a tenanted property.
How to sell a tenanted property
If you plan on selling with tenants in situ, the Renters Reform Bill has got rid of section 21 notices and strengthened grounds for possession under section 8. You have a few options on how you go about selling a tenanted property:
Give your tenants 2 months’ notice
Communication is a key part of being a responsible landlord. You must inform them that you intend to sell the property before it goes through. The new legislation states it is mandatory to provide at least 2 months warning to sitting tenants if you want to sell the property.
Aside from selling the property, ‘reasonable grounds’ for repossession of in situ tenants also include property redevelopment allowing a family member to rent the property
Sell your buy-to-let with sitting tenants
Putting your property on the market with sitting tenants can be difficult, but it’s not impossible.
There are plenty of landlords out there who are open to buying tenanted properties. If a property is already occupied, they don’t need to worry about finding new tenants to make a return on their investment.
Before the sale is complete, you will need to issue a mandatory 2 months’ notice to your tenants. As we mentioned earlier, this can help to increase the pool of potential buyers, since many have a preference for vacant properties.
How much does a sitting tenant devalue property?
Don’t worry! Sitting tenants will not have a big impact on the value of your property – or at least not directly, that is. The real issue is that it will likely take longer to sell your house. How long it takes exactly may boil down to your relationship with your tenants.
If you were easy to reach and quick to resolve issues, tenants will remember this. They will likely be more accommodating when it comes to arranging viewings and keeping your property in good shape. It’s always best to treat tenants how you would want to be treated. After all, you want them on your side when you need them most.
Contact your insurer
If you’re looking to expand your property portfolio using the money from the sale of your current buy-to-let, contact one of our experienced brokers or get a quote. We’d be happy to help you find the best landlord insurance policy for your property.
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