Buying a Property with Sitting Tenants: Key Considerations
Purchasing a property in England and Wales that is already occupied by tenants means that while ownership of the property changes hands, the existing tenancy remains in place. This can be advantageous for buyers looking to invest in a rental property and start earning rental income immediately.
Understanding Vacant Possession vs. Tenants in Situ
When purchasing a property, the contract will specify whether it is sold with vacant possession or subject to an existing tenancy.
Buying with Vacant Possession
A property sold with vacant possession must be unoccupied at the time of completion. The seller is responsible for ensuring that any tenants vacate the premises before the sale is finalised. In England and Wales, tenants typically need to be given at least two months' notice to leave, provided they have an assured shorthold tenancy. If tenants do not vacate by the required date, the seller may need to initiate legal proceedings to regain possession before completion can proceed.
Buying with Tenants in Situ
If a property is sold with tenants in situ, the tenancy agreement remains in place, along with any furnishings included in the rental arrangement. The buyer effectively becomes the new landlord, taking over all legal responsibilities and obligations associated with the tenancy.
For investors seeking immediate rental income, this can be an attractive option as it removes the need to find new tenants. However, it also means assuming responsibility for any existing agreements and tenant-related issues.
Due Diligence When Buying a Tenanted Property
Purchasing a property with sitting tenants requires additional legal and financial considerations. It is crucial to instruct a solicitor or conveyancer with experience in buy-to-let transactions. Key checks include:
Reviewing the existing tenancy agreement to determine the tenants’ rights and obligations.
Confirming the tenancy start date and whether it is subject to rent control or other regulations.
Ensuring the tenant’s security deposit has been properly registered and arranging for its transfer.
Verifying that the property complies with safety regulations, including gas, electrical, and fire safety standards.
Checking that necessary certification, such as Energy Performance Certificates (EPC), Gas Safety Certificates, and Electrical Installation Condition Reports (EICR), are up to date.
Assessing the condition of any furnishings if the property is let on a furnished basis.
Reviewing the rent payment history and ensuring there are no arrears.
Taking an inventory.
Weighing the Pros and Cons
Buying a property with tenants in situ has its advantages and challenges.
Pros:
Immediate rental income from an existing tenancy.
No need to find new tenants.
Potential savings on marketing and letting fees.
Cons:
Inheriting an existing tenancy means you may not have control over the terms until the lease expires.
Potential legal obligations if the tenancy does not comply with current regulations.
Risk of acquiring tenants with a history of late or missed payments.
For buyers planning to refurbish a property before letting it out, purchasing with vacant possession may be the preferable option. However, for those looking for a seamless investment opportunity, buying with tenants in situ can be a smart move—provided the proper legal checks are carried out.
Final Thoughts
Before committing to a purchase, seek professional legal advice to ensure that all tenancy matters are properly addressed. Conducting thorough due diligence will help protect your investment, ensure compliance with landlord obligations, and provide a smooth transition for both you and your tenants.
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