How to sell a property with sitting tenant

There are advantages to selling a property with sitting tenants but there are also challenges. Those challenges can be resolved with organisation and communication. It is, however, advisable to think the situation through carefully before you decide whether or not you really want to sell a property with sitting tenants.

Do you have to sell a property with sitting tenants?

Technically, the answer to this is always no. Even if your tenants have a contract in place, you do have the option essentially to buy them out of it. In the real world, people can generally be persuaded to do what you want them to do if the price is right. 

In the case of tenants, they will know that they may have to move when their contract is up anyway. This means that they could be relatively open to persuasion to leave. 

On the other hand, if you can wait until the tenants are out of contract anyway, then you do not have to negotiate. You can just instruct them to leave although you will still need to give them suitable notice (as defined in law).

If, however, none of these is possible in your case, you can still go ahead and sell your property. You will simply need to find someone who is willing to honour at least the remainder of the lease. 

You may also choose to sell a property with tenants still in it even if they are out of contract. This means that you will continue to receive rental income from the property until it is sold.

The challenges of selling a property with a sitting tenant

There are three challenges regarding selling a property with a sitting tenant. The first is that you’re probably going to attract a smaller pool of buyers. What’s more, these buyers are likely to be bargain hunters. The second is that it can be challenging to organise viewings with tenants in situ. The third is that it entails a lot of extra administration.

Here is some more detail on each of these points:

A smaller pool of buyers

The main reason that there is a smaller pool of buyers is that most people want to buy a property that they can live in themselves. More specifically, they want to move directly from one property to another without any gaps in between. 

Even if the gap itself didn’t phase them, they might not be overly keen on taking on a property with sitting tenants. Firstly, they might not feel prepared to take on the legal responsibilities this brings (not even with a letting agent). Secondly, they probably won’t want to take the risk of a tenant being difficult about leaving. Thirdly, they might not be able to get a suitable mortgage.

With average residential buyers (largely) out of the picture, your only options are investors. You may also get a few residential buyers who feel up to the challenge of dealing with tenants and can either get financing or pay cash. All of these are likely to be experienced business people and understand the advantage they have in this situation.

This is exactly why most houses with sitting tenants are sold for a relatively low fixed price. On the plus side, this does tend to mean that the sales transaction itself is fairly straightforward. It’s highly unlikely that there will be a chain and it’s very likely that the buyer will be organised and motivated.

Challenges organising viewings

Sitting tenants have the right to enjoy the property they’re paying for. They do have to allow you reasonable access for viewings. In this context, reasonable access means with suitable notice. This can somewhat limit your options for arranging viewings although it’s unlikely to be a huge issue.

Realistically, the more important point is that a tenant is highly unlikely to be concerned about presenting your property in its best light. Some tenants will be naturally clean and tidy people. Others may be persuaded to undertake extra cleaning (or allow it to be done) for some alternative benefit (like a discount on their rent). 

Some, however, will take the view that they are paying to enjoy the property and they will keep it how they like (within reason). If they do, there is not much you can do about it. On the plus side, investment buyers are unlikely to be deterred by this.

The transfer process

The selling landlord should provide the buyer with everything related to the tenancy. This starts with the tenancy agreement. It also includes:

• Details of Right to Rent checks
• Details of the tenants’ deposit (that must be transferred to the buyer)
• Details of any rent arrears (or advances)
• A valid gas safety certificate
• A valid Electrical Installation Condition Report
• Copies of inventories
• Details of any ongoing maintenance issues

The buyer will also need a valid Energy Performance Certificate but this should be included as standard with home sales anyway.

Avenues for selling a property with sitting tenants

When looking at avenues for selling a property with sitting tenants, it can be helpful to start with the tenants themselves. If you know your alternative is selling for a relatively low price to an investor, try offering the same price to your tenants. They may be happy to have an economical way to get on the housing ladder.

If your tenants are not able to buy your house (or don’t want to), then your options are to go to a regular estate agent or to go to a specialist. Regular estate agents have more reach in general but specialists tend to have more reach where it matters.

If you’re not in a major hurry, then you might try listing the property with a regular estate agent first to see what interest you get. Just be realistic about the fact that there is a high chance you may end up having to relist it with a specialist. 

Alternatively, if you want to minimise your time to a sale, then your best option is likely to be just to go straight to a specialist. This may cost more but it is often the quickest and most convenient way to secure the sale you want.