Let me put your spinning mind at ease by answering the most frequently asked question around the issue of selling a tenanted property…
Yes, you can sell your property while it’s occupied with tenants; landlords do it all the time, and there’s diddly-squat your tenant can do about it. However, whether you want to sell while it’s occupied is a whole other bag of jam donuts; there are several points that ought to be considered before [haphazardly] throwing your tenanted property onto the market…
Your options when selling a tenanted property
If you wish to sell your property which is currently occupied with a tenant, you have two options:
Sell with the tenancy
With this option, you will sell your property subject to the existing tenancy. That means your tenant will remain in the property after the sale is completed, and they will then start paying rent to the buyer and keep it as a BTL.
Complete sale after possession
In this case, you will need to terminate the tenancy before the sale is completed, so the property is vacant/untenanted.
Do you actually want to sell a tenanted property?
You’ve heard the cliché, right? How buying and/or selling a house is up there as one of the most stressful processes in life. It’s right up there with dealing with bankruptcy, discovering your spose’s porn addiction, and giving birth to a freakishly large 20lb baby.
Well, you can only imagine how much more potentially stressful the process of selling can be with a tenant in occupancy – it’s extra weight to consider during the slog. Of course, that’s not to say there aren’t advantages of doing it.
So, I’m not saying you should or shouldn’t do it, but I am recommending to take a whiff of the following points before pulling the trigger…
With the UK currently suffering from a major housing crisis there is certainly no shortage of buyers trampling over the tire-kickers, whether they be landlord or home-buyer. Heeeeeeeellll, if someone likes your property enough they may even have no qualms with making an offer even if they have no intentions of being a landlord (i.e. they’ll give notice to the tenant when legally possible).
But the reality is, the market for a tenanted property will appeal to a significantly smaller market, so there’s a chance it won’t shift as quickly as an unoccupied version. But that’s not to say that will always be the case, because selling a house successfully often largely intervenes with fate- the right buyer being in the market at the right time.
Complications of viewings
Yeah, taking viewings with tenants in situ can be a right royal pain in the ass at the best of times, and the horror is only amplified if your tenant isn’t pleased with what’s happening (which wouldn’t be terribly unsurprising, and understandably so).
It’s more expensive to sell when vacant
Most landlords prefer to sell their property while it’s tenanted because it’s generally cheaper. Potentially, a shitload cheaper (or more expensive, whichever way you want to look at it).
Bear in mind, if you legally repossess your property from your tenant and then try to sell, you’ll no longer benefit from rental income, which means you’ll have to dig deep into your own grubby little pockets to pay the mortgage. That can become incredibly expensive if the property remains unsold for several months.
This is by far the most common incentive for selling the property while it’s tenanted. Not a bad incentive either.
Condition of your tenant in situ
Let’s consider the laws of probability for a moment, alright?
If you’re selling a tenanted property, the odds are you’re going to attract ‘experienced landlords’, and let me tell you, they’re no fools (well, mostly), which means they’ll throw your tenant under the microscope for thorough probing and referencing before making any serious offers.
So if selling is part of your extreme and flamboyant exit-strategy to unload a rogue tenant that’s disruptive and/or in fallen into rent arrears, the truth will almost always rare its ugly little potato head. On the flip-side, a good tenant will make your proposition a hell of a lot more desirable.
Point is, any serious buyer will care about the condition and quality of your tenant, and selling with a rogue tenant will usually do more harm than good. You’ll have better luck shifting a property that’s subsiding at a 45 degree angle.
Legally repossessing your property
If you’ve decided that getting rid of your tenant before selling is the best move (for whatever reason), the usual rules applies, and you’ll need to legally terminate the tenancy, which may mean you’ll have to get comfy and wait several months.
Notifying your tenant of the sale
If selling with tenants in situ is still Plan A, diplomacy and courtesy will be key to a smooth transition.
Don’t be naive enough to believe you hold all the chips- the tenant is definitely sitting on the same table as the board of directors! While they may not be able to completely stop the process, they will have the ability to make the process unbearably painful or relatively painless (selling is never totally pain free). You’d be wise to play nice in order to minimise the pain.
Offer your tenants first dibs
Purely out of courtesy, even if you know they’re in no financial position to be serious contenders, give your tenants the opportunity to buy the property before going to market.
Explain reasoning BEFORE marketing/selling
Being abrupt in these situations can be profoundly damaging, and that includes marketing before discussing it with your tenants and/or doing it without providing an explanation.
Take the time to talk to your tenants and explain why you are selling. Make up a sob story if you think it will improve your position (e.g. you’re having financial difficulties, so you either have to sell your kidneys, or your house).
Since you have made the decision to sell with tenants in situ, you have the opportunity to spin a story which reflects the tenants best interests (even though you’re probably doing it to minimise the impact on your bank balance).
Reassure the tenants and explain what your decision means:
- You’re not kicking them out, because you don’t want them to lose their home as they’ve been good tenants (I’m assuming they have been)
- The T&C’s of the tenancy still applies (more about this below)
- Another landlord will most likely buy the property, so their occupancy is most likely safe
Can you demand more money for your property with tenants in situ?
It’s entirely possible, no doubt about it. And in many cases, yes.
But, while it may seem logical that a tenanted property should achieve more money, it’s not always as straight forward as that. As discussed, it will depend on the quality of your tenant, but more crucially, the rental yield the property can achieve. In other words, the ROI (Return On Investment), which will specifically take into account the rental income over the initial cost of buying the property. Plus, and needless to say, there needs to be demand for the property.
A good agent will be able to provide assistance with the numbers.
Should you use a normal estate agent?
Technically, you don’t actually need to use an agent at all. Well, in the sense that you don’t need to knock on the door of your local high-street agent. But at the very least, you’d be a total donkey not to use ‘some kind of agent’ to help market your property across the UK’s biggest property portals like Rightmove & Zoopla to generate the leads from prospective buyers. And then, you can take on the task of processing, scheduling and conducting all the viewings if you want to. However, in this very particular scenario, I would avoid going ‘lone wolf’, purely because it’s a buttload more convenient to get a mule on the pay role to liaise with your tenants and schedule the viewings. Doing it any other way usually results in diminishing returns.
In any case, you don’t need any special kind of estate agent to sell a tenanted property, but fetching one experienced in doing so would be particularly beneficial. As said, it’s a pretty common scenario, so you won’t be throwing any curve-balls to any competent agent. So as long as you abide by the regular rules of thumb when choosing an agent to work with (e.g. make sure they’re regulated, shuffle through reviews etc), you should be in safe hands (relatively speaking, of course! We are talking about estate agents after all. Enough said!).
Hello @ agent with experience selling tenanted properties…
So the whole issue of estate agents selling tenanted properties got the ol’ melon curious, so I reached out to a couple of my connections/affiliates in the world of flogging bricks. The marketing folk at YOPA were quick to respond with a bold response: we are both experienced and successful in dealing with selling tenanted properties.
Right, got it!
Someone remind me, what’s the difference between confidence and arrogance?
No, I’m joking.
For those unaware, YOPA is an ‘online estate agent’, so they’re mouth-wateringly cheaper than high-street agents! But unlike many of the other online estate agents, they have the means to provide a local agent that can actually take those blasted viewings for you.
Technically, I’m not recommending YOPA (although these people on TrustPilot are), I’m just the messenger. However, I am saying that if you want to use an agent that is experienced in what you need done, and at a cheaper rate than your local agent, perhaps they’re not a bad option, especially since they offer a free no obligations in-person valuation.
|Estate Agent||Fixed Price||Duration||TrustPilot Rating||Notes / Includes|
9.4 / 10
*Selling fee of £1,399 in a few specific London postcodes.
Scheduling & Arranging Viewings
Regardless of whether who is responsible for the viewings, there are a few statutory rights protecting the tenant that should be respected.
- The tenant should be given 24 hours written notice before a viewing
- The tenant must give consent to each viewing at a convenient time for them
- Constant disruptions might breach their statutory right to live in quiet enjoyment.
It’s crucial to knowledge that viewings are particularly stressful and disruptive to tenants during in this situation, which a good landlord/agent will appreciate and fully understand. So to minimise the pain, I would recommend organising block-viewings (just like I do when conducting regular tenancy viewings), as opposed to scattering the viewings throughout the week. It may also be wise to ask the tenant which days are most convenient for them, and stick to those days. Communication and compromising is key, just like any healthy relationship.
Paperwork / Changing the tenancy agreement contract
As the seller, you don’t really need to be concerned with the legalities of the tenancy after you’ve wiped your little hands clean of the property. It’s the buyer’s responsibility at this point. However, if you really do have a conscious and care for the fate of your tenant, the following information may be of importance (and useful to relay to your tenant during the ‘reassuring’ phase I covered):
- After contracts have exchanged and the property is officially sold, the new owner will automatically become the landlord of the tenants. The text books describe this as saying that he ‘stands in the shoes’ of the vendor. You will no longer be the landlord and therefore you will be dismissed from duty. Congratulations.
- The tenancy agreement contract will remain valid even though the landlords name is out of date.
Transferring the Tenancy Deposit
OOOOH SHHEEEEEET. What about the tenancy deposit?
Ok, so if you have a shred of common sense and you’re worth more than a dollop of dog excrement, then you have complied with the tenancy deposit legislation by securing your tenant’s deposit.
Typically, you don’t need to worry about the deposit, because your conveyance solicitor should help arrange for the transfer of any tenant’s deposit. Bear in mind, you’ll be “transferring” the deposit, and not getting it returned, so whether you want to account for that in the ‘asking price’ is your call.
On that note, may I recommend using a Conveyancer that has experience in selling tenanted properties?
You may also want to contact the deposit scheme directly and discuss the transfer of ownership, as they may have their own guidance and suggestions. Either way, it should be relatively easy.
Completion & apportioning rent
To make the transfer of tenancy easier to cope with, completion is often arranged to take place on a rent payment date, so there’s no need for the rental income to be apportioned between the buyer and seller. However, if that’s not the case, arrangements should be made between the buyer and seller so the appropriate amount of rent is credited to the buyer (assuming that the tenant had paid rent in advance, which is usually the case). Again, your conveyance solicitor should be able to assist with this matter.
Good luck, and happy selling, folks!