You own a house. Great! You’ve rented it out - even better. But now you want to sell it, and you’re worried that your sale could be hindered by your tenants. After all, they live in the property, not you, so it’ll be them who’s packing their bags if you sell. Not that you should be fretting though, as you’re not the only one who’s selling a house with tenants.
In 2017 there were in excess of 4.5 million renters in the UK according to Statista, up from just over 2 million in 2000. Reason? Buying a second house isn’t as hard as it once was. In 1996, we saw the first Buy-To-Let mortgages introduced, soon after the quiet growth of the ‘renovate, rent, refinance’ model and now in the age of AirBNB and Booking.com, the ‘Rent To Rent’ model stealing the limelight. All of which has become common knowledge thanks to the internet.
However as encouraging as this all sounds, it’s important you don’t jump to conclusions. 2017 was also when the amount of UK landlords peaked – according to Hamptons International, in 2017 the numbers hit 2.88 million! Come 2019 and the amount of UK landlords had dropped by 222,570. A move we think will continue during 2021 due to the disruption caused by coronavirus pandemic.
But fact remains that a portion of these 222,570 landlords will probably have mastered selling a property with tenants. So the question remains, how hard can it be? We spill the beans…
On the hunt for something specific about how to sell a house with tenants in it? Use the menu below to find the information you need FAST…
- Why would you be selling a house with tenants?
- Can you sell a house with a tenant in it?
- What’s the value of property with a sitting tenant?
- Can you rent until completion?
- Can a tenant refuse viewings?
- Is there any paperwork when selling?
- Can selling a property with tenants be FAST?
You don’t just decide to sell your house with tenants overnight. Why you choose to sell it all depends on how viable it is for you to do so. Just how viable depends on a whole range of variables including the current situation with your property and your position as a landlord. Ultimately, there’s no one reason for doing so, so here’s eight…
I’m selling a house with tenants because of COVID
COVID has put a lot of strain on UK landlords, especially those relying on rent to cover their buy to let mortgage. You could even go as far to say that Landlords have been forced to foot the bill, by allowing tenants payment holidays or reduced rents. Then to add insult to injury, the government has put a freeze on repossessions, preventing landlords from selling up and taking full advantage of the housing price bubble – a product of the Stamp Duty Holiday. All of which makes being a landlord suddenly seem a far less reliable career path post COVID.
There’s far better places to put my money
Another reason you’re probably thinking of selling a property with tenants, is that alternative routes for investment are likely to give you a higher return. Stocks have been fluctuating aggressively especially since COVID, ecommerce has seen a recent BOOM too, as have crypto currencies such as Bitcoin or Ethereum. Many also require a smaller investment to get started. Choose this road and there’s no real maintenance costs either or financial ties – you can withdraw your money with a click of a button.
It’s time to release some equity
When you’re looking to retire, selling a house with tenants could be an easy form of equity release. As a long-term landlord, your portfolio may also double as your retirement fund. Tap into this and you could become mortgage free on your main place of residence or fund some time out to travel.
My tenants are a BIG problem
Troublesome tenants that are costing you time and money are another good reason to be a landlord selling property. Yes, awkward tenants can make a sale harder, but that doesn’t mean they make it impossible. You just need to find the right buyer.
Can you sell a house with a tenant in it? Yes, you can… we’ll buy it
Buy to let has lost its incentive (cough) Section 24
Yes, since 2017 Section 24 has impacted the profitability of buy to let for good. Also known as tenant tax, this piece of legislation revokes a landlord’s right to deduct mortgage interest (+ other costs) from their rental income prior to calculating their tax liability. Since the amendment, the percentage of a mortgage interest a landlord can offset against their mortgage fell year-on-year by 25%. As of 2020 and beyond, landlords can only claim a 20% tax credit based on the size of their loan and mortgage interest. Far less lenient!
My interest rates are rising
Selling a property with tenants because of high interest rates? Ask us and you’re making a wise choice.
Post COVID interest rates have started to climb, as legislation around rent payment holidays and repossessions has added another portion of risk to any buy to let investment. Regular readers of our blog will be well aware of the love-hate relationship that lenders have with risk, and how riskier investments typically come with a higher APR. But, it’s not just interest rates that are rising.
Requirements for buy to let mortgages have also become more stringent too. In comparison to last year, the amount of mortgage deals that are available has also dropped. There’s now 819 fewer buy to let mortgages out there than there were in 2019 (Moneyfacts). All of which could reduce the numbers of new investors entering the market and potentially make buy to lets harder to sell in the future.
*To put this into perspective, for a property with a 60% LTV the average fixed rate (2 years) is 2.56% - 0.67% higher than it was in March (Property Industry Eye)
Regulations are getting tighter and tighter
As a landlord there’s now more trip hazards than ever before. In 2018, new Minimum Energy Efficiency Standards were introduced and soon after in 2019, the Tenants Fee act changed how assured shorthold tenancies were financed. Now in 2020 and new regulations around electrical safety have tightened and in 2021 there’s talks of ‘The Dogs and Domestic Animals Bill’, which would allow tenants to keep a pet without a landlord’s permission.
The market - it’s gone
In this case, selling your house with tenants would be the best case scenario because at least your property has been tenanted. What with new developments springing up left, right and centre, being priced out of a market is becoming a common occurrence, particularly in areas of student accommodation or HMOs.
Why? Because large development companies know that as long as they keep their build costs low and generously equip properties with en-suites and decent fixtures that they can charge a competitive price, and still make a profit. All of which muscles you out of the market.
I’ve already got an investor lined up
You may already know of someone who’s searching for a rental property or looking at your buy to let as a flip opportunity. Providing your tenant is reliable, this could be incredibly beneficial and save you a lot of time (finding a buyer) and money (agents’ fees).
What do you mean you don’t know anyone like this? We’ll buy your house for CASH
Yes, selling a house with tenants is something you can do, providing you’re the legal owner of your property. Although we wouldn’t suggest just clicking your fingers and erecting the ‘For Sale’ board just yet.
First you need to fill your tenant in on your plans to sell, even if you don’t have the best of relationships. Fail to do so and they could use this against you later on. You see, while they can’t do anything about it, they’re the ones who will be in charge of keeping the property tidy and be inconvenienced by any viewings - an inconvenience they didn’t pay for when they signed their tenancy agreement, so tread carefully. The last thing you want is an angry tenant who only permits viewings at awkward times and doesn’t keep your property looking presentable. That’s a one way ticket to a lower offer.
So as a landlord selling property, it’s vital that you’re aware of your tenants’ rights and bear them in mind before you try to sell your house quickly. What are a tenant’s rights? Read on to find out…
A sitting tenants rights are to
- Be safe in a property that’s in liveable condition.
- Have their deposit returned at the end of their tenancy, providing they’ve upheld their part of the tenancy agreement.
- Challenge any charges you make that they feel to be excessive.
- Know your identity as their landlord.
- Live undisturbed in the property. (Exactly why you must try to cooperate with them around viewings)
- An energy efficient home that’s rated at least E on an energy performance certificate.
- A written agreement if their tenancy is fixed-term and for more than 3 years.
- Have protection in a case of unfair rent or eviction.
How much notice does a landlord have to give when selling a house? (UPDATED FOR COVID)
When selling a rental property with tenants, it’s not mandatory to give any form of notice that you’ll be listing the house for sale, although we would advise that you do. You see communication is key here! Neglect to inform your tenant that you’re selling and you risk them jumping to conclusions as soon as they see the ‘For Sale’ board.
How to tell a tenant you are selling
Sit down with them and demonstrate to them that you’re aware of a tenants rights when a property is for sale and that this is not part of some elaborate master plan to evict them - most likely the first thing that’ll enter their mind. If you’ve not hinted at selling previously, appreciate that this may come as a bit of a shock to your tenants and emphasise that you’re looking to work with them to get the house sold. Also, don’t forget to mention that you plan on selling on to a fellow landlord, so the chances of a sudden eviction are less likely. However, there is a reason we use the phrase sudden eviction.
You see, even if you do find a fellow landlord who is looking to buy a tenanted property, there’s no guarantee they won’t have a change of heart. So, technically your tenants could be evicted earlier than expected due to the sale. But even if this is the case, a sudden eviction still remains less likely thanks to the latest rules brought in to slow down evictions during COVID.
As it currently stands, any landlord would have to wait 6 months to evict a tenant after issuing them notice. Up from 3 months previously. For tenants that haven’t kept up with their rent for over two months, a Section 8 would get the out within 4 weeks. However, in cases of domestic abuse or violence this would take just 2 weeks.
DON’T FORGET: It’s worth adding a day or two to the notice periods above to account for the postage.
Just like with any house, a tenanted property is only worth what someone is willing to pay. There’s a whole host of factors such as: market conditions, timing, the local area, condition, your asking price etc. that will to some extent determine the figure that you achieve. The most influential being the how the buyer intends to use the property.
For a fellow buy to let investor, having a tenant in situ could well be worth a premium. Not only does it save them the time of trying to find a suitable tenant, but it also means the property will be generating cash flow as soon as the sale goes through. All of which makes the property less of a liability and ultimately less of a risk. Brownie points for you, the seller! Find the right pool of buyers and you could have investors fighting to be the highest bidder, which in turn should give you the upper hand in negotiations.
Although, not everyone is an investor with a mind focused on hefty yields, ramping up the ROI or stretching their margins. In fact, investors are a rarer breed, that’s unless of course you’re a serial networker with a roster of connections ‘in the biz’. Networks are hands-down one of the easiest ways for a landlord selling property to find a buyer, whether it’s by leveraging a network you’ve built yourself or somebody else’s.
FYI: Don’t leave us out! Behind the scenes we’re actively growing our very own network of investors, which you can tap into if you sell through us.
But don’t be fooled into thinking that selling a property with tenants is all sunshine and rainbows, because the reality is, it’s not. Fail to have access to a group of cash ready investors and the difficulty cranks up a notch. You see, the average Joe isn’t after an investment so to speak, they’re after somewhere to rest their head and call their home. Yet, just like an investor, they too tend to favour a quick property sale. An expectation that’s almost impossible for you to meet when you have a tenant in situ, particularly one who’s well behaved and giving you no good reason to show them the door.
Landlord selling house during Covid? Sell it to us tenanted or not, in just 7 days…
Yes, for any landlord selling property, renting until completion is certainly a wise option – in fact we’d encourage it as it’s beneficial for both you and your tenant.
For those landlords who choose to sell through the traditional route of an estate agent, this is a particularly wise option. In the words of The Advisory, “the average time to sell a house from the first day of marketing to completion is 129 days or 4.2 months” (yikes)! Then consider that the average rent in the UK sits at £868 and you soon realise just how much money this tactic could claw you back, especially if you get dragged headfirst into a troublesome chain or are forced to wait for slow solicitors.
But financial gains aide, allowing your tenant to rent until completion can also be helpful for your tenant, as it gives them more time to track down an onward rental or purchase. Stress this to them and they should be appreciative because not all landlords selling property would be so kind. Therefore it’s likely if you take this route that your tenant will be more cooperative, which makes selling a house with tenants a lot easier on your end.
NOTE: You never know, if this builds their trust in you as a landlord, they may even ask to be considered as a tenant for other properties in your portfolio.
The only hiccup could be if your tenant leaves your house in a state that the buyer isn’t happy with. For instance, if the buyer agrees to pay X amount based on the condition, but later chooses to decrease their offer last minute because of a drop in the property’s condition. For instance if your tenant vandalises the property or leaves it in a sour state. But it’s not just a troublesome tenant that could trigger this hiccup.
It could happen through no fault of your own. If a potential problem (mould or damp, for instance) is masked by a tenant’s possessions then there’s a chance your buyer will try and pull down their offer. Equally, if your tenant removes any fixtures or fittings you may also be held liable by your buyer.
Whether a tenant can refuse viewings or not all depends on their tenancy agreement.
Some tenancy agreements are more clear cut than others. The main thing to look for is any viewing clauses which permit the landlord or agent to access the house to conduct viewings. Have one of these and chances are that viewings are permitted. Don’t have one of these and you best assume the opposite.
NOTE: Every tenant has the lawful right to enjoy the premises within the specifications of their contract. So as a landlord selling property you MUST respect that, even if your agreement does contain a viewing clause. This is because the line between ‘gaining access’ and ‘forcefully entering’ a property is very slim. Forcefully enter a property to conduct a viewing and it’s likely that in the eyes of a judge you’d still be considered the guilty party.
And while viewings can be legally allowed when selling a property with tenants, your decision to conduct them or not should primarily be based on the tenant themselves. Are they a cooperative tenant? Do you have a good relationship with them? If so then we’d say you stand a chance of coming to an agreement and would encourage you to open discussions with them. However with troublesome tenants we’d curb the issue of viewings altogether. Here’s a good rule to follow…
If your tenant commonly objects to meter readings, inspections etc. then assume they will do the same with viewings.
Selling a property with tenants, but can't be bothered with the hassle? We'll buy it for CASH in 7 days...
If you’re selling to another landlord, make sure your conveyancing solicitor has experience of these types of transactions and that the contract specifies that the property is being sold with sitting tenants. You’ll need to need to provide evidence that rent payments are up to date as well as a copy of the tenancy agreement. A valid gas safety certificate and fire safety certificate are also required – the buyer’s solicitor will be after these documents.
All you do after this is to inform your tenants, via a Section 48 notice, that your property has now been assigned to a new landlord.
If you end up selling the property to a buyer who isn’t a landlord then your tenants must leave by the date agreed. If they refuse to do so, you will have to commence proceedings and apply to the court. This is long and costly and is something to be avoided, if at all possible. It is worthy of a mention though.
What Is Section 21?
Have difficult tenants? You’ll have to apply for a Section 21 notice if you want to evict them. This could be because they’ve caused damage, been abusive or fallen into rental arrears.
Don’t panic! There’s a variety of ways in which you can sell your tenanted property. But if you’re specifically wanting to sell your property FAST, then it’s worth bearing in mind that your options may be slightly slimmer. To show you what you mean, here’s our rundown of the ways to sell a tenanted property...
FYI: This list is in order of slowest to fastest.
Part Exchange schemes – Without question the slowest way to sell a tenanted property would be through a property part-ex scheme, as it’s highly unlikely a developer would even want to buy a tenanted property. So if you’re thinking of selling to move into a new build, you may have to manage two sales: one for your tenanted property and the other with your developer.
FYI: Even if you did manage to find a developer who bought tenanted properties, there’d then be the task of agreeing a price and your house meeting all their other requirements. Part ex schemes are ‘selective’ to say the least, so even if they were open to tenanted properties it’s highly likely that something else about your house may put them off. Call them a dead end.
Estate Agents – Then there’s estate agents, who in the majority of cases aren’t much faster. It’s important you bear in mind that when selling a tenanted property, your pool of buyers will be substantially smaller. Tenanted properties are a red flag to the typical buyer, because as you know when selling a house, bricks and mortar are only half of the question. Your situation as a seller also plays a HUGE part as it can influence both the timescale and smoothness of the sale.
Even if your tenant is hassle-free and you have no dependant sale, the stigma around tenanted properties can very easily make buyers think twice. And yet it’s a pool of buyers that an agent needs, to (A) drum up interest and (B) get you a solid offer.
Auctions – If you’re selling a tenanted property, going to auction would likely lead to a faster sale, although that’s not to say it’s without its faults. Choose an auction and you’ll be liable to pay an ‘entry fee’. This is payable before your property has even gone under the hammer, despite there being no guarantee of a sale. This is usually around £300.
The outcome of an auction (i.e. the figure you achieve) also depends on who’s there on the day. So, if the auctioneers poorly publicise the event and fail to attract the right type of buyer, you run the risk of your property going unsold or selling for less than you’d like.
A ’Sell House Fast for Cash’ service – Don’t want the hassle of finding a buyer? Then a selling a house with tenants to a national homebuyer like us, may be right up your street.
Opt for a cash buyer and the risks of not selling or it becoming stagnant on the open market completely vanish.
We recognise that for any landlord selling property, speed and reliability are essential, as is avoiding picky buyers. So, we’ll buy ANY house, be it neglected, unmortgageable or as yours probably is, tenanted. We’ll also help you complete on your purchase in record time; we can buy your house for cash in as little as 7 days!
Sounds like a good recipe for a sale? Sell us your tenanted property today...