Sell a Rental Property With Tenants

What To Consider When Selling A Rental Property With Tenants

According to the National Residential Landlords Association's (NRLA) recent Landlord Confidence Index Q4 2023, 42% of landlords plan to sell a rental investment in the next 12 months. Whilst it is possible to sell a rental property with tenants in situ, this article provides further context, so landlords can make an informed decision about whether or not to sell their investment with tenants still living in the property.

Why Do Landlords Sell Their Investments With Tenants?

Landlords might sell their rental properties with tenants for a few good reasons. It may not seem obvious at first, but this choice has benefits for many property owners.

1. Steady Income: A big plus of selling a rental property with tenants is keeping a steady cash flow. Landlords can keep getting rent while selling the property.
2. Attracting Investors: This move is attractive to investors looking for quick returns. With tenants already there, new owners don't have to find and screen renters. This saves time and effort.
3. No Vacancies or Extra Costs: Selling with tenants means landlords don't face empty periods or the costs of finding new tenants. It avoids advertising costs and the effort of screenings. The new owner takes on these tasks.
4. Taking Advantage of a Strong Market: In a booming real estate market, selling a property with tenants can be smart. It could bring a higher price, as buyers might pay more for a property that's already making money.

In short, landlords sell properties with tenants for practical reasons. It's either because the tenant is already there, known as 'in situ,' or because of a 'sitting tenant.'

What Does ‘Tenant in Situ’ Mean?

A ‘tenant in situ’ means the tenant is still in their contract term and has the right to remain in the property under their AST (Assured Shorthold Tenancy) agreement. When Landlords sell a property with tenants in situ, any potential purchasers must be made aware of this fact. And the property should always be marketed as such. Any incoming buyers must be prepared to inherit the tenancy terms, and transfer the AST into their own name once the transaction has completed.

What Does ‘Sitting Tenant’ Mean?

A ‘sitting tenant’ will have probably entered into the tenancy before 1989 without an AST, and has earned the security of tenure. This means they retain the right to reside in the property under the Rent Act 1977. Selling a property with a ‘sitting tenant’ can be more tricky. In most cases, buyers are unlikely to secure a mortgage for the purchase. As a result, investors will be limiting the pool of buyers.

Top Tips For Selling A Rental Property With Tenants

1. Give your tenants notice of your intentions
2. Give your tenants reassurance of the implications
3. Be aware of yours and your tenants’ legal rights

Notice

All landlords want a happy, harmonious relationship with their tenants. We believe the best way for this to happen is to be honest and upfront. If you intend to sell your rental property, the news shouldn’t come from anyone else. It’s tempting to avoid upsetting the applecart too soon, but if your tenants hears the news from an estate agent, neighbour, or the community grapevine for example, it can be unsettling. As a result, dealings could become fractious. Legal responsibilities aside, keeping your tenant informed, will ensure you start the process on the right foot. 

Reassurance

If you have made the decision to sell your rental property without serving notice, then your tenants will undoubtedly appreciate some reassurance. Tell them the property will be sold to a buyer willing to take on the contract. Keep them informed of any decisions that may impact their tenancy. And explain you will continue to respect their right to enjoy living in the property. This will help in gaining their support with increased access to their home. See legal rights. 

Legal Rights

Landlords have the right to enter their tenanted property, for estate agency visits or viewings. They must however, provide 24-hrs written notice to their tenants. A tenant can legally refuse entry, which can make selling a rental property more difficult. It's for this reason a landlord should always nurture a friendly relationship with their tenant. For more detailed information regarding the rights and responsibilities of tenants and landlords, read more on the Government’s ‘Private Renting’ page.

What are the Pro’s and Con’s of Selling a Tenanted Property?

Pros:

• Selling a rental property with tenants in situ proves the ‘rentability’ of a property and gives any potential investors reassurance of the yields they can expect
• The property will be sold as a ‘going concern’ and so a purchaser may be thankful to inherit the tenancy and not have to re-market the property on completion

Cons:

• There will be a much smaller pool of potential buyers, so with less competition, you are likely to achieve a lower sales price
• There may be limitations with how access is arranged, and so the logistics of selling will be more complicated

Is there an easier way to sell a property with tenants in situ?

In short, yes. UPSTIX is an cash house buying company for residential tenanted rental property. We provide instant cash offers, typically 11% under market value, for any UK property, and a completion in as little as 7 days. Even with a tenant in situ. It’s a straight-forward process, with no additional fees, and is helping landlords to dispose of their rental investments fast and quickly release capital.

Click for more information on how landlords can sell their rental property fast.

When you consider the logistics and costs associated with selling a property, this is becoming an attractive alternative for UK landlords. See how our costs compare favourably to selling via the traditional method of using an estate agent.

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