Step-by-step guide to selling a tenanted property

Updated: October 29, 2018

If you are a landlord aiming to sell your property with tenants in place, what do you need to do know?

Property for sale sign

Is the selling process different?

Not particularly, no. The only difference is that your conveyancing solicitor and that of the buyer will need copies of the tenancy agreement and renting documents.

You can either sell to another landlord (who may be glad to keep your tenants on), or to a regular buyer, in which case you would of course need give your tenants notice. 

The market for a tenanted property is a lot smaller than one which is vacant, but when you do find a buyer there are many benefits to keeping your tenants on.

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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 is simply transferred to them and nothing changes for your tenants.

  • You do not lose any 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; their rental income will start immediately.
  • 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.
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What about selling to other buyers?

This can be more complicated, as it means ousting your tenants. Depending on the tenancy agreement, this process can take a variable amount of time.

  • For Assured Shorthold Tenancies (AST), you can ask your tenants to move out at any point, but you must give them 60 days’ notice.
  • Once notice is served, you can put your property on the market as you would a vacant house.
  • If your tenants have signed a longer fixed term contract, say for 12 months, you may have to wait to sell.
  • You cannot force them to move out in this case 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 takes a long time to sell and your tenants have moved out, you will lose rental income.
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What about viewings with tenants in place?

It is worth maintaining as good a relationship with tenants as possible so that they are amenable to viewings.

If your tenants have been given notice, good will is even more important; you could even offer a reduction in their rent to make up for the inconvenience of viewings.

When conducting viewings, the rules are:

  • You must give your tenants a minimum of 24 hours’ notice in writing that a viewing is taking place.
  • You can only conduct viewings if the tenancy agreement allows it.
  • If viewings are not covered in the tenancy agreement, your tenants will have to give you permission.
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What about selling with sitting tenants (regulated tenants) in place?

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

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

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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 properly and explain fully; 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.


 

Gaynor Haliday, Legal researcher

About the author

Gaynor Haliday is an experienced legal researcher and published author. She has had numerous articles published in the press and is a legal industry commentator.

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