Buying or Selling a Home With a Sitting Tenant

A sitting tenant is someone renting a home a landlord wants to buy or sell.

Dealing with a sitting tenant comes with many issues to consider but can be done if they are resolved.

The main problems are that the new landlord must take on the seller’s contractual obligations for the tenant, and many lenders and buyers want an empty property on the completion day.

But a good sitting tenant is reliable, easy to take on and pays rent from day one.

Read on to learn more about buying and selling a home with a sitting tenant.

Evicting a tenant

The first step for most landlords selling a rented home is wasting the tenancy agreement to end so they can repossess an empty property.

Sometimes, sellers can agree to an eviction date with the tenant, allowing vacant possession for the buyer.

But most tenants are reluctant to move to suit the landlord, so starting eviction proceedings is more common.

The landlord might serve a possession notice on the tenants. The main advantages of evicting a sitting tenant are vacant possession and a clean slate to start with a new tenant. In addition, landlords have no legacy contracts to handle and can ensure rent is charged at a market rate.

The disadvantages include the vagaries of the housing market and the that investors are likely to offer a below-market value price for the property. Estate agents reckon a sitting tenant can knock 20 to 25 per cent off the value of a home.

Can a tenant buy their rented home?

Tenants do not have an automatic right to buy, which only comes with social housing. However, they have the same opportunity as any other buyer to make an offer to purchase.

Will anyone buy a tenanted home?

Some property investors make buying a home with a sitting tenant their business model, although they expect a significant discount on the purchase price.

Selling with a sitting tenant can sometimes make financial sense. For example, if the market is slow, a landlord must fund the mortgage payments and other bills without any rental income. This amount can add up to over six months or so. If this sum dents a quick sale discount, it may be a better option.

Can a tenant refuse viewings?

Tenants can refuse viewings with a reasonable excuse, such as illness. Most tenancy agreements include a clause allowing a landlord access after giving at least 24 hours notice. If a tenant repeatedly refuses access, landlords can take the matter to court or issue a notice claiming a breach of the tenancy agreement terms.

Buying a home with a sitting tenant

If you are looking to buy a property with a sitting tenant, here’s a handy checklist of points to check:

• Read the current tenancy agreement. You must find out how much rent is paid and any terms relating to rent increases, fixed terms and giving notice.
• Ask to see proof of rent payments and when the rent was last increased- you do not want to inherit a tenant who is a bad payer or be stuck with a below-market value rent.
• Does the property need a licence from the local council?
• Is letting the property restricted? Some neighbourhoods have limits on the number of letting properties imposed by councils.
• Ask for copies of the property’s energy performance certificate (EPC) and gas and electrical safety reports.
• Does the property have smoke alarms and carbon monoxide detectors?
• Is the tenant’s security deposit protected, and was the government How to Rent guide given to the tenant?
• Ask the landlord if any verbal agreements exist with the tenant, like a rent discount for cash payments.

Is buying a home with a sitting tenant a good idea?

Buying a home with a sitting tenant is a financially sound idea. The property generates an income from the first day, and you have gained an uplift in value to the amount of any discount passed on by the seller.

However, failing to check the tenancy agreement details or the tenant’s payment history can be risky.

Can the new prospective landlord grant a new tenancy to the occupiers before completion?

The new prospective landlord can only grant a tenancy to the current occupiers once the sale is completed; they are not the landlord (you continue to be the landlord). Once the sale is completed, the new landlord can agree on new tenancy terms with their tenant or leave the existing tenancy in place.

Can the new prospective buyer serve a possession notice before completion?

No. Similar to being unable to grant a tenancy, only a “landlord” can serve a notice on a tenant.