Buying or selling a property with sitting tenants

Most tenants will have a contract or tenancy agreement that outlines what happens if their landlord sells the property.

With the escalating cost of living crisis, some landlords are reassessing their property portfolios. They are considering whether to buy new properties or sell existing ones. However, it’s crucial to remember that there are rights in place for tenants currently residing in these properties.

If you’re planning to buy or sell a property with sitting tenants, understanding their rights is essential before sealing the deal. The tenants’ rights may vary depending on locations, so always verify these with your local authority.

Tenants’ rights are quite different in Scotland as they have open-ended tenancies rather than ones for a fixed time period.

UNDERSTANDING A SITTING TENANT

A sitting tenant refers to an individual already residing in the property when it’s being sold. If they have an ongoing contract, usually, a sitting tenant will retain their right to live in the property even after it’s sold.

Hence, the new owner must be prepared to take over the contract and see it through to completion.

Sitting tenants can be a boon for some buyers as they eliminate the need to search for tenants. If the sitting tenant has been there for a long time, this may offer a reliable income stream.

Conversely, other buyers might view it negatively if they wish to renovate the property or use it differently.

RIGHTS OF A SITTING TENANT

Most tenants will have a contract or tenancy agreement that outlines what happens if their landlord sells the property. As a buyer, you effectively take over that contract and must adhere to its terms until it is fulfilled.

If the tenancy agreement has no sitting tenant clause, then the default sitting tenant legislation applies.

Typically, a sitting tenant will have the following rights:

• The tenant retains the right to live in the property even when the new landlord assumes management if they have an existing tenancy agreement with the current landlord.
• The sitting tenant currently has the right to stay there until the tenancy ends or they are evicted.
• Sitting tenants cannot be evicted just because you want to do something else with the space. It will only be permitted if they violate the terms of their existing tenancy.
• You cannot charge a sitting tenant for any services or work that the previous landlord has already charged for them.

COMMUNICATING WITH TENANTS ABOUT SELLING PROPERTY

If you’re selling a property with a tenant, communication is critical. Inform your sitting tenants in advance. Before listing the property on the market, discuss with your tenants why you’re selling, what the process will entail and how it will impact them.

HOW TO SELL A PROPERTY WITH A TENANT

There are several ways to handle selling a property with a tenant:

• Offer the tenant first refusal: While a sitting tenant doesn’t have the right to buy the property, you might find it easier to offer them the opportunity to buy it from you.
• Wait until their tenancy ends: If their tenancy has an end date on your contract, you can wait until the current agreement is completed.
• Ask the tenant to leave: This can only be done in specific circumstances and must follow particular procedures.
• Sell with a sitting tenant: Selling a property with a sitting tenant can be advantageous. The buyer takes over the existing contract. This method ensures that your rental income continues uninterrupted throughout the sale process.

MINIMAL DISRUPTION AND UPHOLDING THE RIGHTS OF TENANTS

The rising cost of living crisis presents a unique challenge for landlords and tenants alike. By understanding and respecting the rights of sitting tenants, landlords can navigate this situation with minimal disruption and uphold the rights of their tenants.

Don’t forget, our professional friendly advisors are on hand to support you and can help you explore all of your options.