Selling a house with tenants

  • 31st May 2022
  • 5 minute read
  • Written by Maisie Eames
Selling a house with tenants

In this guide

What to consider when selling a buy to let property
Tenancy agreement
Property Viewings
Your tax position
Selling a property with tenants in situ
How much notice to give tenants when selling a property?
Can you sell the property to another landlord?
Getting ready for the sale
Summary

Landlords sell properties with tenants all the time, but nonetheless there’s more to think about when doing so. You’ll need to think about whether to sell the property to another landlord or just someone who wants it as their home. Sounds like it can get complicated, but our easy guide will help clear things up.

You have a few options when it comes to selling with tenants:

Selling with the tenancy – In this case, the tenants will stay in the property after you sell it and instead pay rent to the new landlord.

Completing the sale after possession (eviction) – this means you will have to end the tenancy before you complete the sale, so that the property is empty ready for a new buyer.

Whichever option you choose, selling your home comes with a cost – check our blog the cost of selling a home for more details.

What to consider when selling a buy to let property

As we mentioned, when selling a buy to let, you have to consider the tenants, so it can be a little more complicated than selling your own home. However, there are some benefits to selling with tenants: If you are selling to a new landlord, the property will be more appealing, because it will be a guaranteed source of income for the new owner. It also means you won’t lose any income up to the date of completion.

However, if you decide to evict the tenants, you will need to consider the legalities and notice period. We will cover this in more detail below.

Tenancy Agreement

Legal differences between tenancy agreements can affect the sale and there are a few different types:

Assured shorthold tenancy (AST)

This is the most common type of tenancy and applies if:

  • the property you rent is private
  • your tenancy started on or after 15 January 1989
  • the property is your main accommodation
  • your landlord does not live in the property

AST doesn’t apply if:

  • the rent is more than £100,000 a year
  • the rent is less than £250 a year (less than £1,000 in London)
  • it’s a business tenancy or tenancy of licensed premises
  • the property is a holiday let
  • your landlord is a local council

Assure tenancy

This applies to tenancies starting between 15 January 1989 and 27 February 1997 and you have increased protection from eviction with this type of agreement.

Non-assure shorthold tenancy

This tenancy applies to those that can’t be AST – whether it’s because the rent is less than £250 per year, the tenant has their main home elsewhere, or you live in the same property as your tenant (as long as you don’t share any facilities).

In this case, the tenant has the right to stay in the property until the end of the fixed term, as long as they comply with the terms of the tenancy agreement.

Regulated or protected tenancy

This applies to tenancies starting before 15 January 1989. You’ll have increased protection from eviction and can apply for a ‘fair rent’.

Property Viewings

Property viewings with tenants in situ could be complicated, especially when the tenants are against the sale. You must understand from the tenants’ point of view that viewings can be stressful and not particularly wanted however to make yours and their lives easier you can put some things into action.

You must give them 24 hours’ notice before a viewing and they must consent to each one.

To reduce disruption, book block viewings and ask your tenants when best suits them, so that they can be done at once and at a time that suits them – keeping everyone happy.

Your Tax Position

Buy-to-let properties mean vendors must pay capital gains tax, due to the profits being made. The amount required to pay is either 28% (for higher-rate taxpayers) or 18% (basic-rate taxpayers) on any growth in value that the property has had.

However, per year in 2022-23, there’s a tax-free capital gains allowance of £12,300 meaning you’ll only need to pay tax on profits above this amount.

Selling a property with tenants in situ

Like we said, you have two options when selling a tenanted property. You could sell it vacant meaning you have to evict the tenants, or you can leave them as they are and sell to a new landlord – there is no right or wrong choice as long as you go through the process morally. In the table below, you will find pros and cons for each option:

ProsCons
Tenants in situYour property will be more attractive to landlords, with good tenants in place.Your tenants will pay rent while you market the property, meaning no void periods.You may limit your buyers to just landlords.The quality of your tenants could affect the sale
EvictionYou’re widening your pool of potential buyers to more than just new landlords.Can cause disruption to your (and your relationship with your) tenants.More expensive to sell when vacant.


How much notice to give tenants when selling a property?

If you want to sell the property vacant, you have to consider your tenant’s position. That’s why it’s stated under section 21 eviction notice that they must be given at least 2 months’ notice from the date given to the date you wish for action to be made to give them time to find somewhere else.

Can you sell the property to another landlord?

As we said previously, if you’re planning on selling your property with the tenants remaining, you will be looking to sell to a new landlord. All you will do is transfer the tenancy agreement to the new landlord and all the terms stay the same for the remainder. This can actually work well as it means minimal distractions for both parties and a guaranteed source of income for the new landlord.

Getting ready for the sale

Congratulations, the property has sold! You still have things to think about. When it comes to deposits, after the tenancy ends, the landlord must return it within 10 days of the tenant’s request.

Summary

To summarise, there are a few options if you’re thinking of selling your property with tenants, and you should evaluate the advantages and disadvantages of each. As long as your tenants are considered and informed throughout the process, you should have a smooth move.

Ready to get moving? Book your valuation with us now or for more information on selling your home, get in touch!

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