How to Sell a Tenanted Property in the UK: A Guide for Landlords

If you’re a landlord looking to sell a tenanted property in the UK, you may be wondering how to go about it. Selling a property with tenants can be a challenge, but it’s not impossible. In this article, we’ll provide a guide on how to sell a tenanted property in the UK and avoid common pitfalls.

Why sell a tenanted property?

There are a number of reasons why a landlord may choose to sell a property with tenants. Perhaps you’re looking to move on to a new investment opportunity or you need to release equity for personal reasons. Alternatively, you may have inherited a property with tenants and wish to sell it. Whatever the reason, it’s important to understand that selling a property with tenants can be more complicated than selling a vacant property.

Can a landlord evict a tenant to sell the property?

In the UK, a landlord cannot evict a tenant to sell the property. There are specific rules and regulations that must be followed, and tenants have rights that must be respected. To sell a tenanted property, you must comply with all relevant legislation.

It’s important to note that if you have a fixed-term tenancy agreement in place, you cannot end the tenancy before the end of the fixed term. If you have a periodic tenancy agreement (rolling contract), you must give the tenant at least two months’ notice before asking them to leave.

Advantages of selling with a tenant in situ:

• You can continue receiving rental income until the sale is completed.
• The buyer benefits from immediate rental income upon completion.
• If the sale falls through, you still have the security of rental income.
• Good tenants are valuable, particularly if the buyer is looking for a property with an existing tenant.
• Investment buyers are often more experienced, making the transaction smoother and quicker, as they tend to be driven more by data than emotion.

Additional considerations when selling a rented property:

• If you paid an agent a commission for finding the tenant, check what happens to this money when you sell. You may be able to recoup the commission from the buyer for the remainder of the tenancy as part of the sale negotiation.
• If the property is let furnished, you’ll need to provide an inventory of the items and agree on a price for any furnishings being sold with the property. If selling with a tenant, the furniture will likely need to be included.
• The tenant’s deposit will need to be transferred to the new owner.
• Investment buyers will want to ensure all tenancy paperwork is in order, including:
  • Proof of the tenant’s Right to Rent.
  • A signed tenancy agreement detailing the terms of the tenancy.
  • Certificates confirming the gas and electrical installations are safe.
  • Evidence that the tenant’s deposit has been correctly protected and all required documents were provided within the proper timeframe.
  • Copies of any legal notices served on the tenant and how they were issued.
  • Information on any current repairs or unresolved maintenance issues.

Preparing to sell a tenanted property

Before you put your property on the market, it’s important to ensure that it’s in good condition. This includes any repairs or maintenance that may be required. It would help if you also considered staging the property to make it more attractive to potential buyers. This may include decluttering, painting, and deep cleaning.

It’s also important to communicate with your tenant about the sale. You should let them know your plans and ensure that they understand their rights. You should also be transparent about the process and inform them of any updates.

Marketing a tenanted property

When marketing a tenanted property, it’s important to be transparent about the fact that the property is being sold with tenants in situ. This can be a selling point for investors, as they will already have tenants and won’t need to find new ones.

It’s also important to ensure your tenant is comfortable with the marketing process. You should let them know when viewings will take place and ensure that they’re happy with the arrangements. You should also allow them to be present during viewings if they wish.

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Negotiating with potential buyers

When negotiating with potential buyers, it’s important to be clear about the terms of the tenancy agreement. This includes the rent that the tenant is currently paying and any obligations that the landlord has under the agreement.

It’s also important to be transparent about any repairs or maintenance that may be required. You should let potential buyers know what the condition of the property is and any work that may need to be done.

It’s important to remember that the tenant has the right to remain in the property until the end of their tenancy agreement. This means that any new buyer will become the landlord and will have to honour the terms of the existing agreement.

Key considerations when selling a property

Your tax position:

Investment properties are typically subject to capital gains tax (CGT), and depending on your personal circumstances, certain allowances or exemptions may be available to reduce your tax liability. CGT can be up to 28% of the property’s increase in value, meaning the final tax bill could impact your decision to sell, as it will reduce the net amount you receive after the sale.

If you have made capital improvements to the property during your ownership, you may be able to offset some of the CGT, in addition to using your annual capital gains allowance.

Your finance position:

If you have a mortgage, there may be penalties for selling before the end of a fixed-term mortgage product. However, if you are nearing the end of the fixed period, remember that conveyancing can take a couple of months after an offer is accepted. The mortgage will only be redeemed when the sale is completed.

Your tenancy agreement:

• This is a legally binding contract between you and the tenant. Selling the property does not mean the tenant must vacate; a new owner can simply assume the role of landlord.
• Many tenancy agreements permit viewings during the final month or two of the tenancy, so check if this is specified in your contract.
• Tenants are entitled to ‘quiet enjoyment’ of the property, meaning you cannot assume automatic access for viewings during the tenancy.
• If you are not in the final period of the tenancy and viewings are not covered in the agreement, you may be able to negotiate access with the tenant.
• Consider what notice you need to give the tenant if you wish to regain possession of the property. A break clause may allow you to serve notice before the end of the tenancy, but without one, you may need to wait until the end of the contract. If the property is under an Assured Shorthold Tenancy (AST), tenants have a minimum right to occupy for six months.

Conclusion

Selling a tenanted property in the UK can be a challenge, but with the right approach, it’s not impossible. As a landlord, it’s important to ensure that you comply with all relevant legislation and communicate clearly with your tenant throughout the process. This includes preparing the property for sale, being transparent in your marketing efforts, and negotiating with potential buyers.