Selling a house with sitting tenants
Selling a house with sitting tenants may be less hassle than waiting until it’s vacant, but it’s also likely to limit your pool of potential buyers, so is it worth it?
There are several different ways to sell a rental property. Some will require the property to be vacant, whilst others will enable you to sell with a tenant. This guide will help you to explore which options are likely to result in the highest sale price, which will be the quickest, and which will best suit your personal circumstances.
In this guide
- What is a sitting tenant?
- Can you sell a tenanted property?
- What rights do sitting tenants have?
- What are the downsides of selling a house with tenants?
- How much will my house be worth if I sell it with a tenant?
- Selling a house with tenants – what are my options?
- Can a landlord evict a tenant to sell the property?
- Can a landlord sell a property without notifying the tenants?
What is a sitting tenant?
The term sitting tenant or tenant in situ refers to a tenant who remains in a property when the property is being sold
A property may have a sitting tenant for a few different reasons. Sometimes an investor will choose to sell a house with tenants because a property offers an attractive investment opportunity for other landlords with a tenant already in situ. Alternatively, a property may have a sitting tenant because the property owner needs a quick sale and can’t afford to wait for the current tenancy to come to an end, or because the tenant has an assured tenancy that prevents them from being evicted.
Can you sell a property with tenants
Yes. In fact, selling a tenanted property may offer several benefits to both you and the new owner.
Selling a property with tenants will mean no costly vacant period for you or the new landlord. You can keep receiving the rental income right up to the day of completion. The new landlord can receive rental income right from the first day of property ownership.
What rights do sitting tenants have?
When selling a rental property with a tenant in situ, the tenant does have certain rights which must be observed.
When it comes to the tenant’s right to remain in the property, it will all depend on what type of tenancy agreement is in place. If your tenant has an assured shorthold tenancy (AST) agreement, then they have the right to live in a property for a fixed period.
If you need to sell your rental property before the agreed end date, your tenant is entitled to stay on as a sitting tenant while the property changes hands. In simple terms, they have sitting tenants rights.
What are the downsides of selling a house with tenants?
The main challenge when selling a house with tenants is that you will only be able to sell to other investors.
There are currently just over 2.5 million landlords in the UK and nearly 15 million homeowners, so only being able to sell your property to an investor limits your pool of potential buyers considerably. A smaller pool of potential buyers means your property may take longer to sell. It is also likely to achieve a lower sale price than selling on the open market as a vacant property.
You should also consider that there is likely to be extra paperwork involved in the sale of a tenanted property. You will need to provide details of the tenancy agreement, financial information relating to the annual yield achieved through the rental of the property, and details of the secure deposit scheme your tenant’s deposit is kept in. This deposit will need to be transferred to a new scheme upon the sale of the property.
How much will my house be worth if I sell it with a tenant?
You should speak to an estate agent in your local area to get an accurate estimate of what your property might be worth both vacant and with tenants. However, as a general rule, it has been estimated that selling your house with a tenant could mean you achieve up to 60% less than you would selling the same property with vacant possession.
Selling a house with tenants – what are my options?
There are several different ways of selling a house with tenants. Most come with a number of pros and cons.
Property auctions often attract investors, so they can be a great place to sell a tenanted property.
The biggest downside to selling a property with tenants at an auction is that it is difficult to predict what price you’ll achieve. If there is a great deal of interest in a property, competing bids will drive the price up. If there aren’t many bidders for your particular property, it could end up selling for much less than predicted. It’s also worth keeping in mind that around 30 percent of properties that go to auction fail to sell. If your property does not receive any successful bids, you will still be required to pay the listing and marketing costs associated with taking a property to auction.
Including marketing time, selling at auction will usually take 8-10 weeks.
There is nothing to stop you selling a tenanted property on the open market through an estate agent, just as you would with any other property. You will, of course, achieve a lower sale price than you would if you were selling a vacant property, but selling via an estate agent will enable you to get the property listed on the main property portals, which will help you reach the widest possible audience.
It currently takes an average of 4-6 months to complete the sale of a property on the open market, however it may take longer if your property can only be sold to investors.
Cash home buying companies
There are some cash home buying companies that buy rental properties with tenants, who will offer to buy your property directly. They will pay less for your property if the property is not sold with vacant possession, however.
It’s worth noting that many property buying companies who say they can buy tenanted properties will be acting as brokers. This means they will try to find an investor to purchase your property. They will not be able to offer you any guarantees about the price they will pay for your property or how quickly they can buy it, so it’s important to proceed with caution, as the industry is unregulated be sure to read up on the Scams to avoid when selling to a House Buying Company.
If you have the option of giving your tenant notice, but just don’t want the hassle and expense of a costly vacant period whilst the sale goes through, a sale to a genuine, direct cash home buying company could provide the solution.
Can a sitting tenant buy the property?
If you are thinking of selling your rental property directly to your tenants, this may seem like the easiest and quickest solution. This is called buying as a sitting tenant.
There are clear pros and cons to selling your rental property directly to your tenants:
Pros of selling to your tenant:
- Hassle free – No need to market your property or pay estate agency fees
- Easy move – No moving process and no need to hand over keys upon completion
Cons of selling to your tenant:
- Appeal to negotiate – Some tenants may feel entitled to pay less than the market value in exchange for a hassle-free, easy sale. Some others may feel they have added value to the property while they have been living there.
- Eliminate bidding wars – If your rental property is sought after, you may receive multiple offers when marketing via the open market. If selling direct to your tenant, you won’t have the opportunity to test the market.
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- Selling a buy-to-let property in 2023
- Selling a UK property from abroad
Can a landlord evict a tenant to sell the property?
Whether a landlord is able to evict a tenant to sell the property will depend on the tenancy agreement in place. You’ll need to check the individual agreement to determine under what circumstances an eviction can be pursued.
Can a landlord sell a property without notifying the tenants?
A landlord should always make an intention to sell the property known to their tenant. Even if they don’t inform the tenant until the sale is complete, the tenancy agreement will stand. This means the new landlord will simply inherit the existing tenancy agreement and will have to abide by the terms of it. They will not be able to evict the tenant simply because the property has changed ownership.