There are lots of challenges a property owner might face when they choose to rent out their house/flat. It is always ideal to have a friendly relationship with your tenants – but even if this is the case, there may be unexpected difficulties that you face along the way.
Selling your property with a ‘sitting tenant’ is a common challenge for homeowners in the UK. There are several different reasons why this circumstance may arise – and in this blog, we’ve outlined what these might be, and how you can navigate these challenges. So, if you’re a homeowner with sitting tenants, then read on – this is the perfect webpage for you.
What is a Sitting Tenant?
A sitting tenant is when someone continues to rent a property which the landlord has decided to sell. This situation most commonly occurs because there is an ongoing contract (i.e. the tenant has the right to continue living in the property for a longer period of time). Most landlords choose to wait until the existing tenant contract is terminated before trying to sell their property.
When a landlord sells a tenanted property, it will typically devalue it. This is a major factor why landlords will wait for the property to be vacant before selling it – so they can get a higher price. It is also considered slightly inconvenient to facilitate regular house viewings for a property which has someone living in it, but often there is no alternative options.
In addition to all of the above, there are different tenancy types, which can have an effect on the house selling process.
Under a ‘non-assured shorthold tenancy’, the landlord is not required to serve a Section 21 or Section 8 notice to bring the tenancy to an end. The landlord is allowed to simply insist on the tenant leaving at the end of the fixed term period.
On the other hand, the most straightforward tenancy type is an ‘assured shorthold tenancy’. Under this agreement, there is an initial ‘fixed term’ agreed – which is typically set for 6 or 12 months. Once the fixed term has passed, the landlord is able to provide two months’ notice to regain possession of the property.
Does a Sitting Tenant devalue a property?
Yes, a sitting tenant reduces the value of your property.
Most figures and studies have found that selling a property with a sitting tenant can reduce its value by between 20 – 25%. This is the case for a temporary agreement, such as an assured shorthold or periodic tenancy.
On the other hand, if a sitting tenant won’t leave the property (for example, under an assured tenancy) then then this can devalue the property even further, to between 30 – 40%.
A house with a sitting tenant is less valuable because of several different factors, including: the inconvenience of dealing with the sitting tenant; the fact that most properties with a tenant currently living there are in worse condition; and because it can sometimes reduce the options available to the new buyer (for example, their ability to renovate and rent out the property in a short period of time).
How to navigate a sitting tenant
If you are committed to selling a tenanted property, then are some tips you can follow to navigate this process.
Firstly, if you are determined to sell your property quickly, you may need to be willing to sell your property at a reduced price. After all, unless your tenants have behaved exemplarily for a long period of time, most potential homeowners will see sitting tenants as a negative thing.
Secondly, you should always maintain clear and consistent communication with your tenant throughout the house-selling process. Even if you do not have a positive relationship with them, giving them sufficient notice of house viewings, or updates on the sale of the house, is both a legal and moral duty.
Thirdly, it is highly recommended that you seek informed legal advice before you take any significant steps. After all, your sitting tenant has rights which you must adhere to, and these will vary depending on the tenancy agreement that is in place. Bringing a legal expert on-board to help you throughout the sale of your property can save you huge amounts of time (and money) in the long-term.
Finally, you should remain open-minded to the possibility of a cash sale. As properties with sitting tenants are considered by lenders to be high risk, not all lenders offer mortgages – and those that do will have less favourable terms. In this instance, selling your property to a cash house buyer may be a more convenient step – and you should remain open-minded to this route, as you won’t necessarily receive lots less for your property than you would’ve done on the open market.
Selling your property without a sitting tenant
If you are selling your property without a sitting tenant, then there may be other questions which pop up which you need the answer to. For example, our blog on “Do landlords need to pay council tax when a property is empty” provides a clear answer to a slightly less common property question. Click on the link to read our blog on this subject, or browse our website for more!