Selling A Property With or Without Tenants
June 12, 2019
There are various reasons why you might be considering selling your rental property. Whether you want to free up some capital, invest in a different area or move away from the rental market completely, when it comes to selling an occupied property you have to consider what you’re going to do about your tenants.
With rental properties, when you want to sell up you can either sell the property with tenants in situ or sell vacant possession. We’re going to explore the main benefits and drawbacks of both options to help you decide which option is best for you and your tenants.
When your property has been tenanted for a number of years it’s normal for it to need some R&R. Waiting until your tenants have finished their agreement before you sell your property can give you some time to make some essential repairs and replace worn and torn items.
These touches can can make the property look more desirable to potential buyers. However, some properties may not require any work OR it may not be necessary for your property to be empty to carry out any repairs if you work with your tenants to minimise disruption.
Depending on the market, there is the possibility that selling your property as an untenanted unit may get you a higher asking price. However, this will depend on the local property market as often there is little difference in price between the two options.
As we mentioned above, you will also have to factor in the time in between selling the property and your tenants moving out, as during this period you won’t be earning any money from your property.
When selling a vacant property to someone that wants to live in it there will often be a chain linked to the property they are selling, and the transaction is likely to take a lot longer in comparison to selling a tenanted rental property to an investor where it is unusual to have a chain.
Potential bigger buyer pool
By selling a vacant property, you may be able to market it to a larger pool of potential buyers. Buy-to-let properties will appeal to prospective landlords and rental property investors but they are unlikely to interest someone who is looking to buy a home for themselves.
However, this does not guarantee a quick sale as it will depend on the demand and condition of the present property market. In London, for example, rental demand is higher than homebuyer demand, meaning there are probably going to be more buy-to-let investors interested in your property than potential homebuyers.
Things to consider
The majority of tenancy agreements are ‘assured shorthold tenancy’ (AST) agreements. This means that a tenant is allowed a minimum term during which they can stay in the property without the fear of eviction – this is normally six months.
With an AST, in order to evict your tenants, you’ll need to issue them a Section 21 notice if you want the property back before the fixed term tenancy has ended, or the tenants have a ‘periodic’ tenancy (a tenancy with no fixed end date). This will require you to give at least two months notice to your tenants to leave the property.
No-fault eviction laws may be changing...
While Section 21 evictions are currently still an option open to landlords, no-fault evictions could very soon be a thing of the past. The UK government has recently announced plans to move towards providing renters with increased protections from no-fault evictions by scrapping Section 21 notices. This is part of a growing shift in the renting world towards providing longer-term security to renters.
As a result, selling tenanted properties is becoming a much more popular option for landlords; it protects tenants from unnecessary evictions, whilst avoiding the financial loss to landlords associated with evictions and empty properties.
Tenants in situ
If you have a fixed tenancy agreement or long standing tenants, you can sell your property without evicting your tenants.
Selling a property with tenants in situ is arguably the most beneficial option; for you, your tenants and the new buyer. The selling process works in the same way as a regular vacant property, except that rental documents, including the tenancy agreement, will need to be given to your solicitor and the buyers’ solicitor as part of the conveyancing process.
A smoother ride
The main benefit of selling a tenanted property is that it can cost you less over the short term. As mentioned above, selling a property can take time, particularly if you need to make repairs to the property or are struggling to find a buyer.
In some areas, a property can take months to sell, which means that you won’t be earning any rental income if your tenants have already left and the property is unoccupied. In some areas, councils can take four to six weeks to come back with the conveyancing searches, such as a Local Authority Search and Environmental Search, which are required before a property is bought. This can cost you more than £1,200 alone – and that's before taking into account the amount of time it takes to put the property on the market and get to a stage where an offer is accepted.
Birds of a feather
Existing tenants can also be a great way to attract buyers when looking to sell your property to fellow landlords. Having a tenant in the property means that the new landlord will be able to earn an income from the property from the get-go as well as bypass finding new, reliable tenants.
This saves time and money, as well as being much more convenient for your tenants.
Selling a property with tenants in situ is almost as straightforward as selling a vacant property. The only difference being that the contract will specify that the property is being sold with existing tenants, including their names, the amount of rent they’ve paid and the terms of the tenancy.
Once you’ve confirmed the details of the tenants and rent payments are correct and up to date, the ownership of the property can then be transferred to the new landlord. The tenancy agreement is transferred to the new landlord as part of the legal process, and the terms of the tenancy can stay the same for its remainder, causing minimal disruption.
The only thing for the new landlord to do is to communicate with the tenants that the previous landlord’s interest has been assigned to them and provide their details. This is in accordance with Section 3 of the Landlord and Tenant Act 1985, and can be done in writing through a Section 48 notice.
Vesta to the rescue
With the help of tenanted property marketplaces such as Vesta, the rental market is becoming a fairer place for tenants and a more cost-effective investment for landlords.
Our easy-to-use, online marketplace is dedicated to the buying and selling of tenanted properties, making the transfer of properties from their current owners to new ones as seamless as possible. Doing it this way helps to form long-term tenant-landlord relations.
If you want to be part of the progress, get in touch with the Vesta team today to find out more.
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