Say you’re an investor landlord with property in SE1, who has decided to sell one of the rentals in your portfolio. It’s a desirable property, in a great location like Lower Marsh or Shad Thames that should have buyers queuing up for a viewing. Your only issue is that there are tenants comfortably settled in the home.
Is it even possible for a landlord to sell in these circumstances – and if so, will it frankly be a bit of a hassle? There are certainly pros and cons to weigh up. We look at what you need to consider before selling a property with tenants and the main options at your disposal.
If you’re wondering, ‘can I sell a property with tenants?’ the short answer is yes. It is perfectly legal and acceptable to put the property on the market with tenants in place. Doing so will restrict your pool of buyers to other investor landlords, but this shouldn’t put you off.
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SE1 is a desirable area for people looking to invest in property, and having tenants already signed up is often an attractive prospect for would-be landlords. However, you do have other options… Read on to find out how to sell a property with tenants, and the pros and cons you need to know about.
There are three basic options when selling a property while tenants are in situ:
1. Sell the property with sitting tenants – also known selling with tenants in situ, this option involves putting the home up for sale while it still has tenants. You should inform your tenants of your intentions and ensure that the property is marketed as having tenants in situ – making sure this is mentioned to anyone viewing the home.
2. Repossess your property before selling – alternatively, you could decide to evict your tenants before you put the home on the market. You can do this using a Section 21 notice as long as the tenant is out of the fixed term of their contract. Check the media and the gov.uk website for changes in the law to Section 21 evictions, which are likely to come in to force this year. If your tenant is still in the fixed term of their contract, you will need to wait until this period elapses, unless they have broken the terms of their tenancy agreement – by failing to pay their rent for example.
3. Sell to your tenants – an easy solution is to sell to your tenants if they are happy in the property and are able to get a mortgage to fund the purchase. When you inform the tenants of your intention to sell, you could give them the opportunity to make an offer.
There are several pros and cons to consider:
If you have decided to go ahead and sell with sitting tenants, the process is pretty much the same as selling any property – but with a couple of extra tasks:
If you’ve decided you would rather not sell with tenants, and your renters have not voluntarily offered to leave, you will need to follow the legal process of giving notice to your tenants – read full details. Remember, you can only use Section 21 of the Housing Act to evict your tenants if they are no longer in the fixed term of their tenancy and you still need to provide the required notice periods. In addition, Section 212 notices will no longer be allowed after the 1st May 2026 due to the enforcement of the new Renters’ Rights Act.
Before deciding whether to sell a house with tenants in situ, research the demand for buying rental properties in your area to get an idea of how easy it will be to sell in the current local and national housing market. Demand fluctuates depending on factors such as mortgage rates and changes to legislation.Â
If you are only considering selling because of the work and hassle involved in being a landlord, consider whether another option such as switching letting agent or replacing bad tenants. Selling a property can be a lot of hard work and there are significant costs involved.Â
Consider the condition of the property – will you need to spend considerable money on repairs and renovations before selling? It is difficult to complete renovations while you have tenants living in the property.Â
Would you be able to afford to continue to pay the mortgage if the tenants leave and you are not receiving rent while the property is up for sale?Â
You will also need to consider what type of tenancy agreement you have, as regulated tenancies can only be sold onwards to another landlord. For assured shorthold tenancy (AST) agreements, you would need to wait until the fixed term tenancy ends before serving section 21 notice.
There are a few different options if you want to sell a tenanted property:
It depends. Selling with a sitting tenant can be more complex and there are some disadvantages, but selling with vacant possession has ups and downs too – like eviction process complications, notice periods and lack of income until the sale.
Whether your tenants are renting under an assured shorthold tenancy (AST), periodic or fixed-term tenancy may limit how and when you give notice to evict to sell with vacant possession. It also matters if your tenancy agreement stipulates that tenants must allow viewings.
You will transfer the tenancy deposit details as part of the property sale, and the new landlord must then re-protect the deposit and issue details to the tenants.
The tenancy documents and landlord responsibilities should be discussed during the selling process, and transferred once the property sale is settled.
Tenants have the right to quiet enjoyment, and to 24 hours’ notice – even if the contract states that the landlord has the right to arrange viewings. Throughout the process you need to respect their rights, and cannot simply enter at will. This is one of the potential challenges of selling a property with tenants in situ.
Selling a buy-to-let property with tenants restricts your pool of buyers to other landlords, which may limit your selling price in some areas. Even so, tenanted property may be a highly attractive prospect to some landlords, as it limits void periods and prevents them having to do the tenant search themselves.
If you sell a property with tenants, you must hand over the tenancy agreement, right to rent confirmation, and details of any repairs requested, breaches of contract or disputes, and rent arrears.
You will have to pay capital gains tax on profits of the sale at 18% to 28% when you sell your tenanted or vacant rental property, or corporation tax if you own it through a limited company.
These taxes do not directly change because you have tenants who occupy the property, rather, it is based on the amount of ‘gain’ in property value since the initial purchase date.
Perhaps. You must be able to provide an up-to-date EPC, gas safety certificate and electrical installation condition report (EICR), so update these if necessary. If these are fully in date or already carried out, it will make the property a more attractive prospect to anyone buying the property with tenants still living in it.
The average house sale takes about 5 weeks to be agreed, but for properties with sitting tenants, it depends on demand for buy-to-lets in your area and the method you choose to sell.
Yes, it’s your responsibility to disclose and provide records of rent arrears or disputes to buyers. It is likely the buyer will demand this as a condition of the sale, as it will significantly impact their finances.
Yes, you need to provide certain tenancy documentation including:
– EPC
– Signed tenancy agreement
– Inventory
– Repair records
– Deposit protection information
– Evidence of right to rent
– Legal notices served to the tenants
– Gas and electrical safety certificates
– Property information form
– Fittings and contents form
– Title deeds
Your property must be fully compliant with rental law when you sell it, and provide continuity by passing on any outstanding repair requests to the new landlord.
If you are a landlord in Bermondsey, London Bridge or Waterloo, who has decided to sell with tenants in situ, we have the experience and knowledge of the local rental market to help. Contact us today to discuss your situation and arrange a no-obligation appraisal of the property.
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