A step-by-step guide to selling a tenanted property

A home with tenants in situ can be harder to sell, but there may be benefits. Here's a list of the issues, and what you can do to make the process easier.

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Is the selling process different?

Not particularly, no. The only difference is that both your conveyancing solicitor and the buyer's solicitor will need copies of the tenancy agreement and any other documents relating to the rental agreement.

if you are selling to a regular buyer who intends to live at the property, you will need to give your tenants notice.

However, if you are selling the property to a landlord, the landlord may be happy to keep the tenants on. The market for tenanted properties is smaller than for vacant properties, but there may be benefits to keeping your tenants on.

What are the benefits of selling to another landlord?

If you sell to a landlord, the process is likely to be more straightforward: The tenancy agreement can be transferred to the new landlord and nothing changes for your tenants.

  • You would keep receiving rental income up to the completion date.
  • Your buyer will have ready-made tenants, so won’t have to waste time and money advertising the property.
  • The buyer would start receiving rental income immediately after completion
  • Depending on the rental yield, selling your property as an investment to another landlord could make it more valuable than selling it vacant.
  • Your tenants will not necessarily have to move out.

What about selling to other buyers?

Selling to a buyer who intends to live in the property can be more complicated, as it means serving notice on your tenants.

  • For Assured Shorthold Tenancies (AST), you can ask your tenants to move out at any point, but you must give them 60 days’ notice.
  • If your tenants have signed a longer fixed term contract (e.g. for 12 months) you may have to wait to sell.
  • Once notice is served, you can put your property on the market as you would a vacant house.
  • You cannot force the tenant to move out unless they breach the terms of the tenancy agreement.
  • If tenants do not agree to leave, the tenancy agreement will be passed on to the buyer, who will be unable to evict them or cancel the agreement.
  • If your property has not sold before your tenants move out, you will lose rental income.

How do I arrange viewings on a tenanted home?

When arranging a viewing for an interested buyer:

  • You must give your tenants a minimum of 24 hours notice in writing.
  • You can only conduct viewings if the tenancy agreement allows it.
  • If viewings are not covered in the tenancy agreement, you will need to get permission from your tenant.

Try to maintain a good relationship with your tenants. If you give them sufficient notice, most tenants will be amenable to viewings. If there are likely to be lots of ongoing viewings, you could offer a reduction in the rent to make up for the inconvenience.

    What about selling with sitting tenants (regulated tenants) in place?

    Sitting tenants are in a different category to those on an Assured Shorthold Tenancy. Sitting tenants are protected under the Rent Act 1977, under which a landlord cannot evict a tenant with a Section 21 Notice.

    Evicting a sitting tenant may be a very difficult and expensive process and may not be possible at all.

    Other things to consider

    • If you are giving your tenants notice, consider giving them first refusal on buying the property. They may be in no position to buy, but the courtesy of offering to sell their home to them may help to keep them on side during the selling process.
    • Another landlord looking to buy your property is going to vet the tenants. If you have problem tenants it may be best to wait until they have moved out, rather than risk them putting potential buyers off.
    • If you have to ask tenants to leave, talk to them, explain why you are selling and be considerate. It is in everyone’s interest to make the process as amicable as possible.
    • If your tenants are on an Assured Shorthold Tenancy, their deposit must be held in a Tenancy Deposit Scheme (TDS). If they are required to move out, you will need to make sure their deposit is returned to them when they leave.

    Your next step

    If you are buying, selling, remortgaging or transferring equity in a home, we can help you find an expert conveyancing solicitor.

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    Gaynor Haliday, Legal researcher

    Author:
    Gaynor Haliday, Legal researcher