Can you sell a property with tenants in situ? There are many reasons why a landlord would be thinking of selling a tenanted property, from wanting to live in the property themselves to simply wanting to release their capital.
So, is it possible to sell your property with a sitting tenant?
You can sell a rental property with tenants still occupying it, but extra considerations apply. Tenants can stay until their tenancy ends. and viewings require proper notice and coordination. Disclosing tenancies upfront and transferring deposits and agreements at completion is essential.
Selling an investment property with tenants comes with both pros and cons. While you don’t lose rental income during the sale, and tenants can make the property more attractive to buyers, they limit viewing availability and flexibility.
UK law protects tenants, so you can’t force them to vacate against their tenancy agreement.
This guide will walk through everything landlords need to know about selling a rental property with tenants in the UK. We’ll cover:
- The benefits and drawbacks of selling with tenants in place
- Tenant rights protections during the home sale process
- Tips for selling your rental property successfully with tenants
- Viewing access considerations with occupied properties
- Whether to offer tenants cash for keys to move out early
- Your other alternatives like timing tenancy expirations with completion
- How occupancy impacts property value
- Key steps in the sale process with tenants
By the end, you’ll understand your options and be equipped to navigate this tricky situation. While selling with tenants complicates the transaction, it’s possible with the right approach. Let’s dive in.
The Benefits of Selling a Rental Property With Tenants
Although an occupied property presents some challenges, there are also several advantages to selling your rental investment with tenants in place:
- You don’t lose rental income while the property is on the market. Having paying tenants guarantees rental revenue continues during the potentially lengthy sale process. Vacant units generate no income.
- Tenants help maintain the property and viewing-ready. Occupied rental properties tend to stay in better condition, with tenants actively living there and reporting maintenance issues.
- Tenants make the property more attractive to buyers who want turnkey rental income. Many real estate investors specifically target properties with existing tenants to minimise voids between taking over ownership.
Selling your rental property while tenants are living there means you continue earning without disruption while listing the property. And you can market the in-place tenants as a value-add for turnkey rental investors.
The Drawbacks of Selling With Tenants
However, having tenants in the property can also create challenges during the sales process:
- Tenants limit viewing availability for potential buyers. Scheduling viewings around tenant schedules reduces flexibility, especially for occupied houses.
- Buyers may want vacant possession or to move in themselves. Some potential buyers may intend to occupy the home versus continue renting it out.
- Tenants can complicate move-out negotiations after a sale. New owners may want tenants to leave once the sale is completed, requiring potentially tricky negotiations.
While you don’t lose income with occupied units, reduced viewing access can mean it takes longer to find a buyer. Buyers who want to become owner-occupants may offer less for a tenant-filled property or pass on making an offer altogether.
Tenant Rights During the Home Sale Process
If you decide to sell your rental property with tenants still living there, you must adhere to all relevant landlord-tenant laws that protect tenants’ rights:
- UK law protects tenant rights. Landlords must follow all applicable UK laws regarding tenant protections. These vary slightly between England, Scotland, Wales and Northern Ireland.
- Tenants are entitled to remain until the end of the tenancy term. Tenants in a periodic or fixed-term tenancy generally cannot be forced to leave sooner if the landlord sells the property.
- Tenants must be given proper notice before viewings. UK law details how much notice is required before entering for viewings and open houses.
- Tenants can’t be evicted to make a vacancy for sale. Landlords cannot serve notice and terminate the tenancy solely to make the property more marketable for sale.
Tenant rights mean you can’t remove them to make selling more convenient. Be sure to follow all notice requirements for viewings and understand that tenants are entitled to complete their tenancy term.
Tips for Selling Your Investment Property With Tenants
If you decide to sell your rental property while still occupied, these tips can help the process go smoothly:
- Provide tenants with written notice about plans to sell. Transparency about your intentions helps them be prepared for viewings and a transition.
- Ensure the tenancy agreement is transferable to the new owner. Assignability clauses ensure the tenancy is conveyed to the buyer at completion.
- Do minor touch-ups and depersonalisation to improve home appeal. Small fixes and removing personal items help make the property look good without disturbing tenants.
- Offer tenants a “cash for keys” agreement to move out early. Paying them to leave voluntarily avoids forceful eviction.
Proper tenant communication, an assignable tenancy, strategic property preparation, and “cash for keys” agreements facilitate sales with minimal disruption to tenants or your bottom line.
Viewings and Access Considerations With Tenant-Occupied Homes
Once you list your occupied rental property for sale, you must take steps to access the home for estate agent viewings:
- Provide proper notice before entering for viewings. Follow UK law about minimum notice needed to enter for viewings. Typically, 24-48 hours.
- Schedule viewings during convenient times for tenants. Accommodate tenant schedules the best you can to minimise disruptions to their lives.
- Offer tenants a gift card or discount for cooperation. Incentivise tenants to keep the home viewing-ready and flexible with £25 gift cards or discounts off next month’s rent.
- Hire a letting agent to handle viewing coordination. A letting agent acts as a neutral third party to schedule viewings and open houses with tenants.
While viewings require extra coordination with tenants in place, proper notice, win-win negotiation, and even small rewards can secure their cooperation.
Should I Offer Tenants Cash to Move Out Early?
To gain more control over your occupied rental property during a sale, some landlords offer tenants a “cash for keys” agreement to terminate their tenancy and vacate the home voluntarily. It’s important to note that this can only be done during the periodic tenancy after the fixed term has ended.
Here are some considerations around this approach:
- Weigh costs vs. value of getting vacant possession. Calculate the fees and payments against how much more buyers may pay for a vacant home.
- Make sure move-out terms are written in the contract. Detail the expectations, incentives, timeline, and penalties in a formal agreement both parties sign.
- Consider paying expenses related to their early termination. Offer to cover moving costs, deposits, rent differentials, and other related fees so the tenants aren’t financially harmed.
While paying tenants to leave can help you sell for more, weigh whether those costs outweigh the increase a vacant property brings in the sale price. Also, protect yourself legally with a documented contract.
Alternatives to Selling With Tenants in Place
Outside of paying tenants cash for keys, here are a few other potential alternatives to selling an occupied rental property:
- Consider temporarily relocating tenants to another property you own. If you have other vacant rentals, you could move tenants there during viewings and the sale process.
- Time the sale to coincide with the end of the tenancy term. Plan your listing so current tenancies expire around your expected completion date.
- Rent home back from new owner after completion. Negotiate a short-term leaseback with the buyer so tenants can stay until their tenancy ends.
Getting creative with relocation options, tenancy timing, and leasebacks can allow you to sell while honouring tenant agreements, minimising disruptions for all parties.
Is My Property More or Less Valuable With Tenants?
Whether having tenants in a rental property you want to sell increases or decreases the home’s value depends on several factors:
- Income-generating rentals often sell for more. Properties producing rental income tend to appraise for more as turnkey investment properties.
- But tenants limit the pool of potential buyers. Owner-occupants may not be interested, reducing demand and price competition.
A tenant-filled property can sell for a premium to the right real estate investor buyer looking for passive rental income. But it limits options for buyers who want to occupy the home. Conduct market analysis to set an appropriate price accounting for these dynamics.
How Does the Sale Process Work With Tenants?
If you decide to sell your rental property with tenants in place, here are some key steps in the sales process:
- Disclose tenancy terms early in listing details. Being upfront about existing tenants in marketing materials and viewings helps set expectations.
- Require buyers to honour existing tenancy agreements. Write this stipulation into the sale contract to convey all tenancy obligations.
- Tenants sign estoppel documents confirming tenancy terms. This legally verifies that there are no outstanding issues between the tenant and the seller.
- Transfer deposits with the buyer at completion. Work with solicitors to transfer any security deposits to the buyer.
Communicating about current tenants, legally requiring buyers to inherit the tenancy, and properly handling the tenancy deposit protection keeps everything above board when selling and transferring an occupied rental.
A landlord looking to sell a house with tenants in situ should consider all the factors before placing the property on the market. A property with sitting tenants can add complications compared to a vacant property, but it is possible.
The pros of maintaining rental income through a sale must be weighed against drawbacks like limited home access.
While tenants have legal rights, you also have options like cash for keys agreements.
Careful planning around tenancy terms, transparent communication, and win-win negotiation can allow you to sell your occupied rental property smoothly.
Please follow all UK landlord-tenant laws, disclose tenant status upfront, and work creatively to accommodate all parties involved in the transaction.
With the right strategy, you can successfully sell your rental property even with tenants in place. Just follow this guide to navigate the intricacies of this unique situation.
Frequently Asked Questions
Q: What Is a Sitting Tenant?
A: A sitting tenant refers to a tenant already occupying a property when it is put up for sale.
Q: How Do I Sell a House With Tenants?
A: To sell a house with tenants, you can either sell the property to another landlord who is willing to take over the tenancy, or you can sell the property with vacant possession, which means the tenants will have to leave before the sale.
Q: Do I Need to Inform My Tenants if I Want to Sell the Property?
A: Yes, it is important to inform your tenants if you want to sell the property. Maintaining a good relationship with your tenants is also recommended throughout the selling process.
Q: Should I Use an Estate Agent to Sell My Tenanted Property?
A: Using an estate agent can be beneficial when selling a tenanted property as they can handle the marketing, viewings, and negotiations on your behalf. They also have experience dealing with the legal and logistical aspects of selling a property with tenants.
Q: Can I sell a property with tenants in situ on property portals?
A: Yes, you can list a property with tenants in situ on property portals. However, it is important to clearly state in the listing that the property is being sold with tenants and provide any relevant information about the tenancy.
Q: Can I Sell a House With Sitting Tenants to Another Landlord?
A: Yes, it is possible to sell a house with sitting tenants to another landlord. This can be an attractive option for landlords looking to expand their portfolio and already have experience dealing with tenants.
Q: What Happens to the Tenancy When the Property Is Sold?
A: When a property with tenants is sold, the tenancy agreement is transferred to the new owner. The new owner becomes the landlord and is responsible for all future aspects of the tenancy, including collecting rent and maintaining the property.