Are you a landlord? Do you have tenanted property that you need to sell? In this guide, we discuss the options available to landlords who want to sell a tenanted property.
Selling a property, be it for personal or business reasons, can be incredibly stressful even at the best of times. But now more than ever, the effects of Covid-19 have made many property owners, including landlords, reassess their property ownership and property portfolios.
The buy-to-let market has seen a significant downturn of late and according to a recent study in ‘Landlord Today’, over a third of landlords in the UK are considering reducing the number of properties they own in 2020 / 2021.
The reasons for wanting to sell, according to the study undertaken by Accumulate Capital, found that 61% those wanting to put properties on the market was in response to the increasing regulations and taxes imposed by Government on landlords. Another standout statistic for landlords wanting to sell was the cost of managing a property portfolio, which had increased ‘considerably’ over the last five years.
If you are a landlord wanting to liquidate assets from a rental property, you are not alone and many landlords are finding themselves in a tricky situation of doing what is right for their business, but also doing what is right for their tenants. Due to the challenging and difficult economic climate, this is a now common situation that many landlords will find themselves in.
When selling a tenanted property – you basically have 2 options. Option 1, evict the tenants and sell the property as vacant possession, or option 2, sell it as an investment opportunity to other landlords and tenants stay in situ.
If you choose the route of option 1, there are several factors you must consider:
Without tenants, you may find the property will sell easier to wider audience.
A property without tenants if often easier to arrange viewings for potential buyers.
A property with no tenants can be decorated and refurbished for sale which may improve sale price.
The Government website have up to date information regarding the eviction of tenants in England and Wales, and new legislations are coming into effect so it is important to know your rights as a landlord and the rights of your tenants. Information from the Scottish Government can be found here.
Once you have lawfully evicted your tenants, you can then proceed with the sale of the property. Bear in mind, the longer it takes to sell a property that you have evicted tenants from, this will mean no income on the property and as owner of the property, you are responsible for all bills, maintenance and upkeep. Carefully assess your finances when you ask tenants to move out, and when the property is likely to sell if you rely on rental as a main form of income.
If you choose Option 2 and sell the property with existing tenants in situ this could be a good investment for the right buyer as it will mean an income from onset of ownership. It will also mean that whilst the property is on the market, the tenants are still paying rent and is not sat vacant.
Whilst there are advantages to option 2, some buyers may be put off by existing tenants, especially if they do not look after the property. Again, weigh up the pros and cons of each option before deciding what is right for your sale.
The ongoing situation with Covid-19 and lockdown restrictions is constantly being reviewed by the Government regarding selling a tenanted home, associated taxes and charges – so it’s best to refer direct to the Government website for information.
If you choose option 1 and decide to evict your tenants to prepare for a sale, you must follow correct procedures.
The most commonly used contracts for tenants are called ‘Assured Shorthold Tenancy’ agreements (AST). This type of contract allows you to evict a tenant through a Section 21* notice. You can action an eviction by issuing a Section 21 after tenants have completed their ‘fixed-term’ tenancies. Or there may be reasons under Section 8, for earlier eviction, if they have broken the laws under Section 21. (*Check Government guidelines as Section 21 is currently under review through consultation).
Most AST agreements require 6 months’ notice to bring a tenancy to an end, some are only 2 months, but you must check what the agreement is and ensure you adhere to the terms when asking tenants to leave a property.
Landlords have a responsibility to their tenants and must remember it is not just a property, it is a tenant’s home. There are best practice procedures to follow to keep both landlord, and tenant happy.
The sale may come as a shock, so try to explain your reasons for the sale as it could go a long way in making the eviction process amicable and pleasant for all involved. Be polite, courteous and respectful as being told you need to leave you home, can be a distressing conversation for a tenant and one that needs to be handled with care.
If the tenant has the financial means, you could offer them ownership of the property as they may be interested in purchasing the property as their “forever home”. Be sure to explore this option especially if the tenants have occupied the property for a long period of time.
Advise tenants if the property is purchased by another landlord as an investment, they may be given an opportunity to remain in the property as tenants of the new landlord.
Keep communication channels open so tenants now how the sale of the property is progressing. Having tenants on side will prevent any hiccups from occurring further down the line. Some tenants may not want to be in the property during viewings as they may find strangers viewing the property awkward, uncomfortable or disruptive. Landlords must remember, especially if a family occupies the property, that too many disturbances and viewings may make tenants leave before the sale is complete – so tread carefully.
The deposits paid by tenants to landlords at the beginning of a tenancy agreement must be protected. If the property is not sold to another landlord, then the tenants should be given the deposit back. However, if the property is being sold to a new landlord, both landlords (the seller and the purchaser) have a legal responsibility to protect deposits and transfer to the new buyer to arrange the necessary protection. The government has useful information on their site for deposit protection schemes.
All landlords should respect private renters rights and it is important to respect those rights. As a landlord, you have numerous moral obligations and tenants have the right to; -
The secret to selling your tenanted home is to engage in communication from the onset. Being open, honest and discussing your intentions with your tenants, will result in a much easier sale of your tenanted property.
Spring’s homebuying service can assist landlords by purchasing a property when tenants have reached the end of their tenancy agreement at a date that suits both parties. The ability to collaborate with Spring and choose a completion date, can eliminate the risk of landlords being in possession of a vacant property and running up expenses associated with a vacant property waiting to be sold on the open market.
Our experienced team can also discuss our ‘bespoke’ homebuying options for those landlords with properties they need to sell quickly that have existing tenants.
Contact Spring today to discuss how our trusted and transparent homebuying service can provide the right solution for your business needs.
No, properties can be sold as vacant or tenanted. Some tenants choose to purchase the property from a landlord, especially those that are long term, so make sure you explore all options prior to sale.
You must give your tenants notice, in writing, if you want them to vacate the property and on what date. The notice period you give them must be a minimum of 6 months.
Prior to August 2020, the required notice period was 2 months, however extensions of notice periods are now in place due to Covid-19 lockdown restrictions.
Under current guidelines, if you give notice to your tenants under a Section 8 notice, the eviction process can be shorter depending on the reasons and circumstances sited for eviction.
Spring are experts in property management, with a proven track record of providing an excellent service that offers care and attention to our customer’s individual needs. For more information on how we can help you, get in touch with us via email or on 020 8629 7877.
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