Thinking about selling a tenanted property? You’re not alone – 153,000 landlord properties were sold between 2021 and 2022, which was 8.5% higher than predicted, according to HMRC. It’s clear the buy-to-let selling boom is on.
If you want to sell up, you might have difficulty with sitting tenants already in the house. It’s an added complication that can devalue the property if you want to sell, but it’s not impossible – and with the right approach, you can still sell quickly without much hassle.
Let’s dive into the world of sitting tenancies and how this unique situation could affect how much you sell your house for. Keep reading.
A sitting tenant is someone who already lives in the property when it’s being sold. This is usually someone who’s already agreed to rent out the home, but the homeowner has decided to sell.
The most common type of rental agreement in the UK is an Assured Shorthold Tenancy agreement. If this is in place, then the tenants have the right to live in the home until the tenancy agreement finishes – not just because you’ve sold to someone else.
Other types of tenancy agreements exist in the UK, such as assured tenancies, but they’re rare to see. If they are in place, they make selling a property more difficult.
Selling with a sitting tenant can be challenging, so understanding the rules and regulations around selling a home with tenants in situ is incredibly important, to always ensure that you’re on the right side of the law. Otherwise, you put yourself at risk of litigation down the line from your home’s inhabitants.
If you want to sell a home on the open market, you’ll have to give your tenants 24 hours’ notice before every viewing. This can put off some buyers who might want to move quickly with a sale if the local market is competitive.
Another drawback is with sitting tenants, you’re cutting out anyone who wants to move into the property themselves because someone else is already living there. That limits your options to other buy-to-let landlords looking for another property.
Then there’s the issue of your tenants not exactly being thrilled about the prospect of multiple viewings where they live. It’s vital to keep an open line of communication with them as much as possible. If you can sit down with them, alleviate any concerns and give them a rough timeline of events, that’s even better.
There’s always a silver lining. Some buy-to-let investors want to start earning from the property immediately, so having tenants in situ is ideal. If you have good tenants who pay the rent on time and aren’t any trouble, this is worth its weight in gold to some professional landlords. They may choose to buy your property to avoid the hassle of finding new tenants.
A house with sitting tenants drops in value by an average of 20% to 25%. This can drop even further if there’s a long-term agreement, like an assured tenancy, in place.
One way around this is to offer the tenants first refusal on the home. Depending on their financial circumstances, they might be interested in buying it from you away from the open market.
A drop in value isn’t always a guarantee, either. It depends on how buoyant the market is and how many other properties are for sale at any given time. Right now, the Bank of England’s interest rate hikes to 5.5% have slowed the property market down. The average house price in September 2023 is now £257,808, which is £14,500 less than the year before.
But that same pressure from the central bank and a lack of inventory has seen rental yields skyrocket, too, which may appeal to some investors. In July, the cost of a new tenancy rose by an average of 9.9% to £1,282 a month. This increased rental opportunity may tempt some buy-to-let buyers to snap up more stock in their local area.
If you need to sell quickly, there’s always the option of either auctioning the property or going through a cash buyer, but you won’t get as much money for the home as you may on the open market.
You can’t evict tenants just because you want to sell. The tenants must have broken the lease terms to trigger a Section 21 eviction notice, which gives them two months to vacate the property.
An AST is usually a maximum of 12 months, with the option to renew the tenancy or find somewhere else to live. You can either wait until they’ve left to sell your property or serve a Section 21 notice towards the end of the agreement.
Some landlords prefer to offer financial incentives for their tenants to end the tenancy early and move elsewhere. This can work if you want to sell quickly because you need to free up cash or face financial difficulties.
You should always speak to a property professional or your letting agent if you want to evict a tenant. They can help you avoid any pitfalls and ensure everything is done above board.
As a landlord and the homeowner, you have rights – but so do your sitting tenants. You also have the right to access the property, providing you give your tenants 24 hours’ notice. It’s their home, too, so you can’t turn up announced.
If the tenants have broken the tenancy agreement in any way, such as missing rent payments or having a pet when it’s against the lease, you have the right to issue a Section 21 notice to evict them.
You also have the right to sell the property whenever you like, but the tenants can only leave unless they choose to do so via a break clause in the AST agreement.
If you want to sell your house with a sitting tenant, then We Buy Any Home can help. Contact us today for a free conversation.