Navigating the sale of a property with a sitting tenant can be a complex affair. As a landlord, you’ve poured resources and care into your property, and when it’s time to sell, it’s not unreasonable to expect a fair return.
The presence of a sitting tenant, however, can introduce additional layers to the selling process. Prospective buyers typically seek a property for their own use, not one that’s already occupied. This raises important questions: what’s the best approach to sell a property under these circumstances, and does a sitting tenant affect its value?
What is a sitting tenant?
A sitting tenant refers to a person or people who reside in a property that is currently being let by a landlord. When a landlord opts to sell the property while it is still tenanted, this is termed as selling with sitting tenants.
Should the sale proceed, the residing tenants would continue to live in the property, with the new owner stepping into the role of their landlord. These tenants are sometimes also known as ‘tenants in situ’.
Does a sitting tenant devalue a property?
The short answer is yes, a sitting tenant typically devalues a property. Quantifying the impact, however, isn’t straightforward. Devaluation hinges on the local demand for investment properties and the type of tenancy agreement in place.
The most significant impact comes from assured or regulated tenancies, where tenants may have indefinite rights to stay by law. This could reduce the property’s value substantially, as any new owner must accept the long-term commitment or be prepared to deal with an eviction process. Soon new laws will come in making tenant eviction easier for landlords planning to sell.
Of course, if another landlord is buying the property, a sitting tenant may actually be more appealing as they can start receiving rent from the minute you hand the keys over. Unfortunately, selling only to landlords reduces your market size considerably.
Below is a table featuring rough estimates of how much a property might be devalued depending on the type of tenancy agreement in place. These figures vary with location and market conditions. For landlords in high-demand areas for rentals, they might get closer to the full market value.
|Tenancy type||Potential devaluation|
|Assured Shorthold Tenancy||20-25%|
Do sitting tenants still pay rent while the property is listed for sale?
During the sale process, sitting tenants are obligated to continue paying rent. Should they fail to do so, landlords have the right to initiate eviction proceedings under Section 8 of the Housing Act 1988.
For an eviction to proceed, the tenants must have fallen into arrears by a minimum of eight weeks for weekly or fortnightly payments, two months for monthly payments, or three months for quarterly or annual payments. Landlords need to be aware of these thresholds when considering eviction due to non-payment of rent.
Do sitting tenants have rights?
Sitting tenants, like all tenants, are afforded certain rights that safeguard their tenancy, just as landlords have their own protections. These rights vary depending on the tenancy agreement established.
Under an assured shorthold tenancy (AST), tenants are entitled to occupy the property for a predetermined term, typically ranging from six to twelve months. Should the AST expire without renewal and the tenant remains, the tenancy automatically converts to a periodic tenancy, shifting from a fixed term to a rolling month-to-month basis.
Tenants with assured or regulated tenancies enjoy more extensive rights than those under an AST. For instance, they might have succession rights, allowing them to pass on their tenancy to family members or even the right to occupy the property indefinitely.
If a tenant is on a periodic tenancy, you can evict them via a “no-fault eviction”. This process takes about 4 – 6 months, and costs range from £1,500 to £4,000 depending on the solicitors you use. However, the section 21 route is soon to be abolished, and instead you will have a new law which permits eviction purely on the grounds of selling the property.
Can the sitting tenant buy my property?
It’s possible for a sitting tenant to purchase the property, and it could be the most advantageous starting point. Presenting your tenants with the opportunity to buy the property before it’s advertised publicly – known as “first refusal” – could bypass estate agent fees, eliminate the need for property viewings and expedite the sale process.
Since your tenants are already established in the home, they’re likely to be more amenable to the sale. Moreover, they could potentially reduce their monthly outgoings, as mortgage payments may be more affordable than rent. On the other hand, you can’t expect that a tenant will have the financial means to buy the property, so it’s worth having a backup plan in place.
Selling a property with a sitting tenant
Selling a property with a sitting tenant can be more intricate than selling an unoccupied one. Landlords must inform their tenants well in advance of their intention to sell and provide at least 24 hours notice before viewings.
It’s also helpful to reassure tenants about their rights and the transfer of their security deposits to the new owner.
Landlords considering selling a tenanted property have several avenues:
- Via an estate agent, particularly one skilled in tenanted properties, who sets a very competitive price and manages the sale, typically taking three to six months.
- Through an auction, appealing to investors eager to expand their portfolios, offering rapid sales, sometimes in under 28 days, but potentially at a lower price.
- With a home-buying company like Property Rescue that’s known for super-fast, hassle-free property purchases that save on fees such as estate agent commissions. Get an instant offer on your property now.
Here at Property Rescue, we offer landlords a quick sale without the usual uncertainties. This can be particularly advantageous if you’re looking to sell promptly without the complexities of estate agents or auctions and have a tenant in situ.
With Property Rescue, landlords can benefit from a direct, efficient transaction, ensuring peace of mind and financial clarity from the outset, without needing to worry about evictions.