Selling Property with Sitting Tenants: What Landlords Need to Know

How to Sell a House with a Sitting Tenant: A Complete Guide

Selling a house with a sitting tenant can be more complicated than selling a vacant property, but it also has its advantages. Whether you're an investor looking to liquidate an asset or a landlord looking to cash out, understanding how to sell a property with a tenant in place is crucial. This guide will walk you through the process, legal considerations, and strategies for selling a property with sitting tenants in the UK.

What Is a Sitting Tenant?

A sitting tenant is someone who is renting a property under an existing tenancy agreement. This can include:

1. Assured Shorthold Tenancies (ASTs): The most common type of tenancy in the UK, usually with a fixed term or rolling contract.
2. Protected or Regulated Tenancies: Older agreements that offer tenants more rights, including protection against eviction and rent control.

Benefits of Selling a House with a Sitting Tenant

1. Attracting Property Investors

   • Many property investors prefer properties with tenants already in place, as it provides an immediate rental income stream. This can be particularly appealing if the tenant has a good track record of timely payments.

2. Easier Cash Flow for Buyers

   • Selling with tenants in situ means the new owner can start earning rent from day one, making it a potentially attractive option for buy-to-let investors.

3. No Vacancy Period

   • You avoid the hassle and costs associated with evicting tenants, preparing the property for sale, and waiting for it to sell while it sits vacant.

Challenges of Selling a House with Sitting Tenants

1. Reduced Buyer Pool

   • Selling with a sitting tenant may deter some buyers, particularly those looking for a home to live in themselves. This means you may need to target investors specifically.

2. Lower Offers

   • Some buyers may offer less for a tenanted property due to perceived risks, such as the potential difficulty of evicting tenants if needed.

3. Tenant Cooperation

   • Having tenants in place can complicate viewings, negotiations, and the sales process if they are uncooperative.

Step 1: Review the Tenancy Agreement

Before listing your property for sale, it’s crucial to review the existing tenancy agreement:

1. Fixed-Term Tenancy

   • If your tenant is on a fixed-term contract, you cannot ask them to leave until the contract ends unless they breach the agreement.

2. Periodic Tenancy (Rolling Contract)

   • For periodic tenancies, you must give your tenant at least two months’ notice using a Section 21 notice if you plan to sell the property without tenants.

3. Protected Tenancies

   • If the tenant has a protected tenancy, selling with the tenant in place is often the only option, as they have significant rights, including lifelong tenancy.

Step 2: Decide on Your Target Buyer

When selling a house with a sitting tenant, it's essential to target the right type of buyer:

1. Buy-to-Let Investors

   • Investors are often willing to purchase tenanted properties because they provide immediate rental income. Highlight the property’s rental yield, tenant payment history, and potential for capital growth.

2. Cash Buyers

   • Cash buyers may be more willing to purchase properties with sitting tenants as they can close deals quickly and are often more experienced in handling tenanted properties.

Step 3: Prepare Your Property for Sale

Even though your property is tenanted, it’s still essential to present it well:

1. Communicate with Tenants

   • Inform your tenants about your plans to sell and how it may affect them. Ensure they understand that their rights will be protected under the new ownership.

2. Schedule Viewings

   • Arrange viewings at convenient times for the tenants to minimize disruption. Provide plenty of notice, as required by law.

3. Provide Financial Data

   • When marketing to investors, include rental income, tenancy terms, and tenant history to demonstrate the property’s value as an investment.

Step 4: Legal Considerations and Notices

Selling a property with tenants involves additional legal steps:

1. Tenant Rights

   • Under UK law, tenants have the right to stay in the property under their existing agreement, even if ownership changes hands. The new owner must honor the terms of the existing tenancy.

2. Section 21 Notice

   • If you plan to sell the property vacant, you’ll need to issue a Section 21 notice to end the tenancy. Ensure you comply with all legal requirements to avoid delays or disputes.

3. Right to First Refusal

   • In some cases, tenants may have the right of first refusal to purchase the property, particularly in the case of flats. Check the terms of the tenancy agreement before proceeding.

Step 5: Marketing the Property

To attract investors, focus on the investment potential:

1. Highlight Rental Income

   • Emphasize the rental yield and potential for capital appreciation, particularly if the property is in a high-demand area like London or major commuter towns.

2. Use Property Portals and Agents

   • List your property on popular platforms like Rightmove, Zoopla, and OnTheMarket. Work with estate agents experienced in selling tenanted properties, like Fraser Bond.

3. Create an Investment Pack

   • Provide prospective buyers with a comprehensive investment pack, including details on rental income, lease terms, maintenance history, and tenant payment records.

Frequently Asked Questions (FAQs)

1. Can I sell my house with a tenant still living in it?
Yes, you can sell a property with a sitting tenant. The buyer must honor the existing tenancy agreement, and the tenant retains all their rights under the agreement.

2. Will selling with a sitting tenant lower the property’s value?
It may limit your buyer pool to investors, which could result in a lower sale price. However, highlighting the property's rental income can attract serious investors looking for buy-to-let opportunities.

3. How much notice do I need to give my tenants if I want to sell the property?
For tenants on a periodic tenancy, you typically need to give at least two months’ notice using a Section 21 notice. However, tenants on a fixed-term lease cannot be asked to leave until the lease ends, unless there’s a breach of contract.

How Fraser Bond Can Help You Sell a Property with a Sitting Tenant

At Fraser Bond, we specialize in helping landlords sell tenanted properties quickly and efficiently:

1. Expert Marketing: We target property investors looking for rental income, using a strategic marketing approach to reach cash buyers and buy-to-let investors.
2. Full Legal Support: Our team assists with all legal requirements, ensuring compliance with UK property laws when selling with tenants in situ.
3. Negotiation and Closing: We handle negotiations with potential buyers, ensuring a smooth sale while protecting your tenants' rights.

Conclusion

Selling a property with a sitting tenant in London can be complex, but with the right approach, it can also be highly rewarding. Whether you're looking to liquidate an investment or transition out of property ownership, Fraser Bond can help you navigate the process smoothly.

For expert assistance with selling a tenanted property, contact Fraser Bond today. Let us help you achieve the best possible outcome with minimal hassle.