Can you sell your property with a tenant in it?

If you have a legally and safely let rental property and a good tenant, you should be able to sell with them in situ. As well as enabling the tenant to stay in their home, it’s something that can work very well for both you and the new owner.

The seller can keep receiving rent right up to completion, and the new landlord gets a going concern that will generate income from day one. And, assuming the property is legally compliant and well maintained, the buyer may not need to invest any additional capital right away - which landlords often have to do when buying a vacant property, especially when it hasn’t been let before.

Other potential benefits:

• If you can sell via your letting/managing agent to another one of their current landlords and therefore avoid the need for extensive marketing, you may be able to negotiate a better sales fee.
• You’ll keep receiving rental income until the sale has completed, so will avoid the financial pressure of having to personally subsidise any mortgage payments.
• There’s no need to clear the property of any furniture or be concerned about redecorating and staging for sale.
• If you sell to an experienced landlord investor, they’re likely to have a good conveyancer and mortgage broker that will be able to progress and complete the sale relatively quickly.

Could I get a higher sale price on the open market?

It’s true that other landlords are likely to offer less than the ‘true’ market value, as they’re looking for the best possible return on their investment. However, we find that many people who choose to buy a former rental property for their own home also offer under the asking price, as they tend to want to upgrade or replace fittings and décor. That means there may not be much difference in the eventual sale price, regardless of the type of buyer.

Of course, there are always exceptions, which is why it’s important to have your property valued by an experienced local agent that deals in both sales and lettings. They can advise you on current demand from both landlords and other buyers and help you decide on the best route forward.

What are the rules around marketing and selling with a sitting tenant?

As the tenancy is ongoing – and will continue to be legally valid once ownership transfers to the new owner - you must continue to respect the tenant’s rights. That means you must give them at least 24 hours’ notice of any visit – and remember that they are not obliged to grant access.

Because there may be multiple visits from potential buyers, as well as a surveyor and possibly other tradespeople, it’s well worth taking the time to ask your agent or discuss your plans with the tenant before moving ahead. They are bound to have questions and will appreciate you being open about the process.

One way to reduce the time from an offer accepted to completion, is to instruct a legal company that is experienced in selling properties which are already let prior or on the day of marketing. This can help to ensure all the information the new landlord may need upfront, before making an offer, is available and if there are any legal issues, these can be sorted prior to an offer being made, hopefully ensuring there is a lower chance of the sale falling through.

Once the marketing/sale is underway, ensure your agent or you keep your tenant informed and make sure there is the opportunity for the potential new landlord to meet the tenant in person. That should reassure both parties about the future success of the tenancy and help ensure a smooth sale.

The other key thing to know is that the sales contract will need to reflect the fact that there is a sitting tenant. Standard sales require that the buyer has vacant possession, so both legal companies must be aware that this will not be the case, and it’s likely that their conveyancing fees will reflect this extra work.

Key things to check/do before marketing the property

With the Renters’ Rights Bill likely to be passed this year – and upcoming changes including section 21 being abolished and fines for landlords increasing - prospective buyers will be especially focused on checking the condition of the property and quality of the tenant.

So, before moving ahead:

• Check the property is currently legally let:

• Are the gas safety certificate, EICR and EPC all valid?
• Are there the right number of working smoke alarms and carbon monoxide detectors?
• Do all soft/upholstered furnishings included in the sale comply with fire safety regulations?
• Is the property in good condition and free from hazards such as damp?
• Has the tenant been provided with the correct version of the government’s ‘How to rent’ guide?

• Is any deposit registered in a government-approved scheme?

• Speak to your tenant – or ask your agent to - to explain the process and reassure them that they are not being evicted.
• Engage a legal company, ideally before you market the property, that has experience of transactions involving a sitting tenant and provide them with:
  • A copy of the tenancy agreement
  • Confirmation that rent has always been paid on time and in full, and that there haven’t been any problems with the tenant
  • Copies of the current gas and electrical safety certificates
  • Information on how the deposit is protected – this will need to be transferred to the new landlord after completion

If you are thinking about selling your rental property and would like to discuss your options, we’re always here to help. Just get in touch with the team in your local branch and our experts will be very happy to help.