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How to Sell a House With Tenants

Got tenants in your investment property but looking to cash out of the rental market? Selling up doesn’t have to be a headache, even if your home is currently occupied. With some care around communicating with your renters and allowing viewings, plus patience, you can successfully offload your let. 

Here, we talk you through how to sell your tenanted property in a fair, tenant-friendly fashion.

What does tenant in situ mean?

You’ve likely seen the phrase ‘tenant in situ’ used to describe properties for sale. But what does it mean in plain English? Essentially, it signifies that the property is currently rented out to one or more tenants when put on the market. 

The tenants will remain in residence throughout showings and likely throughout the sales process right up until completion. In some cases tenants may stay put even after the purchase, depending on the new owners wishes.

While having an occupied property can pose some challenges for viewings and reduce the pool of potentially interested buyers, it isn’t an insurmountable barrier if handled appropriately. 

With a little extra effort coordinating access and presenting the property in the best possible light around tenants’ belongings, you can achieve a successful sale. Plus, there are other sale options, which we’ll cover in a bit. 

What are the advantages of selling a house with tenants?

Selling a tenanted property can be a smart choice for landlords, providing a cost-efficient and straightforward way to sell. It’s particularly beneficial for landlords who advertise their property as a buy-to-let opportunity to other landlords and investors. 

A property with existing tenants means the new owner can immediately benefit from a reliable tenant and start earning rental income from day one. New owners also avoid the lengthy process of vetting new tenants and save on the expenses involved in getting a property ready for rent. 

These advantages are key selling points that landlords should highlight when promoting their property. For the seller, a key benefit is the continued income from rent up to the sale date. Additionally, both the seller and buyer can prevent any loss of income due to vacant periods with a tenant in situ sale.

The tenant benefits as well, as they can stay in their home with minimal disruption.

What are the drawbacks?

The process might get more complicated if the buyer isn’t another landlord, and they might not be keen on buying a property where the tenant still has many months remaining on their rental contract. That said, all tenancies are soon to become periodic tenancies as part of the renters’ reform bill, which will make all tenancies ‘rolling’ from day one. These new laws will also facilitate easy eviction of tenants in cases where the property is being sold.

But, based on the current laws, that still stand now in 2024, the new owner wouldn’t legally be able to evict the tenant until the contract is up. Therefore, selling a tenanted property could significantly lower the pool of potential buyers, as other landlords are really the only ones to benefit if the tenant has a long time left on the rental contract. 

What is vacant possession?

To broaden interest in your property, you may decide to sell it without tenants, known as vacant possession. This approach means the property will be unoccupied at the sale’s completion, allowing the new owner immediate occupancy.

To achieve vacant repossession when you have tenants, means you first need the tenants to leave. Often, to achieve this means you issue a section 21 eviction notice to tenants. As mentioned earlier, this notice can only be served if any fixed term of the tenancy has already  expired. 

Section 21 will be scrapped as part of the new laws coming in soon, so when that happens most landlords will simply evict the tenants before the sale.

Getting rid of tenants simplifies house viewings, and it means you can jazz up the property with a fresh lick of paint, as there’s no need to cater to a tenants needs.

However, opting for this method means forfeiting rental income, which can be financially challenging if the property doesn’t sell quickly. The current eviction notice period to tenants usually spans two months, if they leave without a fight. If they refuse to leave you could be looking at more like 6 months to get a court order and have it enforced.

Of course, if you have bad tenants, it’s possible they will make property viewings impossible because they can deny entry, and they have the legal right to do so. If they do deny entry, then you will find it very difficult to find a buyer.

Will I need to pay capital gains tax if I sell a tenanted property?

When selling investment properties, capital gains tax usually applies, but your specific situation might offer allowances and exemptions to lessen this burden. The tax can reach up to 28% of your property’s value increase, which could influence your decision to sell, as it affects the final amount you receive after the sale. If you’ve made significant improvements to the property while owning it, you might be able to offset a portion of this tax liability, in addition to using your yearly capital gains allowance.

Could I sell the property to my tenants?

Selling your property to your current tenants, while not always feasible, can be the easiest option. Many tenants rent due to a lack of savings for a deposit or because it fits their lifestyle better.

Yet, your tenants might be considering a future purchase. If they’re fond of your house, buying it could save them the trouble of searching for a new place and moving. Additionally, this route spares you the complications of having to request them to vacate.

If you think your tenants are financially stable,  it might be worthwhile to bring up the possibility with them.

What is the process for selling with a tenant?

Selling a property with tenants involves several steps:

  • Notify the tenants about your plan to sell and enquire if they want to stay post-sale.
  • List the property for sale, clearly indicating it has sitting tenants, or evict the tenants first.
  • Organise property viewings, ensuring any remaining tenants are informed about the timings.
  • Once a buyer is found and an offer is accepted, create a contract that allows the sale of the property with any existing tenants factored in.
  • It’s highly recommended to engage a conveyancing solicitor to manage the legal aspects of the sale.

Additionally, you’ll need to transfer the tenancy agreement and tenant’s deposit to the new owner, along with all necessary safety certificates and information.

How else can I sell my home with a tenant in situ?

If you want a quick sale without needing to worry about the buyer’s stance on buying with or without a tenant, Property Rescue can help. We specialise in buying tenanted properties. 

Our approach benefits you the seller, because we guarantee a swift sale of your property. So get in touch if you want a hassle-free, efficient sale designed for landlords. We can even complete the sale in as little as 48 hours, plus our solicitors can handle all of the legal costs.

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