Selling a property with a sitting tenant means selling it while the tenant is still living there and paying rent. In the UK, this is a legal and common practice, especially for landlords who want to sell to other landlords or investors. However, there are some important things to think about before going ahead with this type of sale.
What Is a Sitting Tenant?
A sitting tenant is someone who has a legal tenancy agreement and continues to live in the property while it is being sold. This can include tenants on rolling contracts or those with fixed-term agreements. The tenant keeps the same rights after the sale, and the new owner takes over as the landlord.
It is often less desirable to buy properties with sitting tenants because rent is fixed for a certain price due to laws surrounding ‘fair rent’ and there is no certainly over the quality of tenants. With sitting tenants, there are opportunities to buy the property below market rate, sometimes at 75% or 80% of the value.
If It’s Less Desirable, How Do You Sell A Property With a Sitting Tenant?
- Open market – through agents
- Through auction (see auction finance loans)
- Through a private buyer (see companies that buy properties with sitting tenants)
Do You Have to Evict the Tenant First?
No, you do not have to evict the tenant before selling the property. In fact, many buyers are happy to purchase homes with sitting tenants, especially if the tenant has a good history of paying rent and taking care of the property. Evicting a tenant takes time and can be costly. If the goal is simply to sell the home and not to use it yourself, selling with the tenant in place is often quicker and easier.
However, if you want to sell to someone who wants to live in the property, you may need to give the tenant notice. In England, this usually means giving a Section 21 notice, which gives tenants at least two months to leave. If the tenant does not leave, you might need to go to court to get possession of the property.
Can You Increase the Rent Before Selling?
You cannot simply increase the rent to charge more without following the proper steps. If the tenant is in a fixed-term tenancy, the rent usually cannot be changed until the term ends, unless the contract allows it.
For periodic (rolling) tenancies, you can increase the rent, but you must give proper notice. In England, this is at least one month’s notice for monthly rent. The rent must also be fair and in line with similar properties in the area.
Raising the rent just before selling might not be the best idea, as it could upset the tenant and make the property harder to sell. It’s often better to let the buyer decide on rent changes after the sale.
Can You Update the Tenancy Agreement?
You cannot force a tenant to sign a new agreement just because you are selling – this will lead to a tenant deposit dispute. The existing tenancy agreement remains valid and will transfer to the new owner. If the tenant and new landlord agree, a new contract can be signed after the sale, but this is not required.
Buyers will want to see the current tenancy agreement, rent payment records, and any deposit protection details. This helps them understand what they are taking on and shows that the sale is being handled properly.
Pros of Selling with a Sitting Tenant
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You continue receiving rental income until the property is sold.
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The property is more appealing to investors who want instant rental returns.
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The sale process can be faster, as there’s no need to wait for tenants to move out.
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No need to spend time or money fixing up or staging the property for viewings.
According to government figures from 2023, around 4.6 million households in England live in private rented homes, so there is strong demand for investment properties.
Cons of Selling with a Sitting Tenant
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Fewer potential buyers, as most homebuyers want to live in the property themselves.
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The sale price may be slightly lower due to reduced control for the new owner.
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Buyers may be put off if the tenant has not maintained the property well.
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Can make the property less attractive to non-investor buyers.
Conclusion
You can legally sell a property with a sitting tenant in the UK, and it can be a smooth process if done properly. You don’t have to evict the tenant, but you must provide all the legal documents and follow the rules.
Selling with a sitting tenant can save time and keep rental income coming in, but you may get fewer offers and a slightly lower price. Think about your goals and speak to a solicitor or estate agent to make the best decision for your situation.
