With so many changes to the laws and legislation around rental properties, many landlords are feeling the pinch and exiting the market. Selling your investment can be a little bit more complicated when there are tenants involved but that’s why we have created this little guide to help you gain clarity.
You can sell with tenants in situ!
The tenancy agreement and other documents need to be given to your solicitor and the buyers’ solicitor. Other than that the process is just the same as if you were selling a vacant property.
If your fixed tenancy agreement is still in place and your tenants are happy and settled, it can be beneficial to you to continue with your plans to sell.
Tenants can stay put
If you’re able to find a buyer who is looking for an investment for themselves, they are often happy to keep the tenants on. This saves you having to issue notice and the tenants themselves aren’t disrupted. The tenancy agreement transfers to the new landlord so for the remainder of the tenancy agreement, the terms all stay the same.
You’ll save money
If you ask your tenants to leave because you want to sell, you can end up out of pocket. Selling with them still in the property ensures you don’t lose income right up to the day of completion. It also works well for the new owner so they similarly don’t have any void period.
What about selling to other buyers?
Don’t limit your market for the property by deciding you only want to sell to another landlord. It can be a little bit challenging as it depends on the contract you have with your tenants, called the ‘tenancy agreement’. If you’ve got a properly done shorthold tenancy, you can serve notice whenever you like but you must give them a ‘Section 21’ notice. The notice period is for 60 days. Once you’ve given this notice, then you can market the house and advertise to buyers that it will be vacant possession. However, if you do find a buyer who is a landlord, you can then go back to your tenants and offer them to stay instead.
Tenancy deposit protection scheme
The Government backed scheme protects tenants’ deposits to ensure they’re kept safe and returned at the end of the tenancy. You will need to ensure that you provide the deposit they are owed when they leave your property.
Again, some challenges can arise with gaining access to a rental property for viewings as it depends on your tenancy agreement. You won’t be able to carry out viewings if it’s not specified in the contract. If your tenant doesn’t give you permission to enter the property, you will not be able to conduct any viewings. The better the relationship you have with your tenants, and if your paperwork is all correct and up to date, you’re less likely to face these issues. Even if it is in your contract, you will need to give the tenants 24 hours’ notice for each viewing and in writing.
What might go wrong and how to solve it
If you find a buyer who wants to move into the property themselves, the tenants will have to leave. This can be difficult if your paperwork hasn’t been properly done at the beginning and your tenants refuse to leave.
When purchasing a property, the buyer becomes responsible for the tenants and the tenancy agreement you had with them. The buyer does not have the right however to cancel this and evict the tenants. This means the chances of completing a sale with that buyer is slim!
During a fixed term contract, if the tenants breach the agreement or break a clause within it, e.g. don’t pay their rent, then you have the right to evict them. It can be complicated if any other situations arise, so it’s always best to keep your tenants on side.
A solution can be to sell the property to the tenants themselves. Some people rent due to a lack of affordability but if you don’t ask, you don’t know. They could have been saving up to get on the ladder themselves. There are some excellent independent financial advisors locally who can assist with sourcing the most attractive terms from lenders across the marketplace. This is route avoids a lot of the complexities of issuing notice so can be a great solution for all parties.