Sell a House With Tenants: Can You Evict if You Need to Sell?
Looking at how to sell a property with tenants, how sitting tenants can affect a landlord when they sell a house, and how we can help you sell.
Alexandra Ventress ★ Digital Content Writer
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Having a buy-to-let property is a wonderful investment opportunity for many people, that lets them boost their retirement fund and puts them more in control of their own finances. But when the time comes to sell a house with tenants, you can be left wondering whether you will need to evict or keep them in the property.
In this blog post, we will be looking at how you can sell a property with tenants, whether you need to evict your tenants in order to sell and if a sitting tenant devalues your property.
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How much does a sitting tenant devalue a property?
Unfortunately, when it comes to selling a house with tenants, they do devalue your property. There is no blanket answer to this question, but estimates suggest that selling a property with tenants in situ can devalue your property by 20% if it has an assured shorthold tenancy in place. If you have a property where the tenancy agreement is assured or regulated then the tenant has greater rights, and you will be looking at your property value being reduced from anywhere between 30% to 40%.
Can you evict tenants if you need to sell?
If you are looking to sell your buy-to-let property that has tenants in situ, then you will need to tread carefully, as you are not entitled to evict the tenants. You will only be able to sell the property with your tenants as sitting tenants, or you will need to give them notice of end tenancy. You will be able to do this by either using section 21 of the Housing Act 1988 or section 8 of the Housing Act 1988.
If you use section 21 of the Housing Act 1988, you will need to give at least 2 months’ notice in writing. You can use Section 21 either:
- During a tenancy if there is no fixed end date (called a periodic tenancy)
- After a fixed tenancy ends (as long as there is a written contract)
However, you cannot use Section 21 if:
- it has been less than 4 months since the tenancy started or the fixed term has not yet ended. If there is a clause in the agreement that allows you to serve a Section 21, then this can happen
- the tenancy started after October 2015 and neglected to use a letter with all the same information on it as a form 6a, or a form 6a
- as the landlord you have not repaid any unlawful fees or deposits that you charged your tenant
- your buy-to-let is classed as a house of multiple occupancy (HMO) but you do not have an HMO license from the local council
- you have not put your tenant deposit in a deposit protection scheme and the tenancy started after April 2007
- the council has served a notice on the property in the last 6 months that says they will do emergency works or an improvement notice
A section 8 notice will give you reasons for wanting possession such as:
- your tenants have used your rental property for illegal reasons
- there is a ‘break clause’ in your contract
- you wish to move into the property for yourself
- your tenants have fallen behind on rental payments
How much notice does a landlord have to give a tenant before selling the property?
When your tenants first moved into your property, you will both have signed a rental agreement. This gives both parties certain rights and responsibilities whilst inhabiting the property. When you decide to sell, the first step you will need to take is to inform your existing tenants of your plans. Every rental agreement is different, but most will include a clause which states how much notice landlords are required to give tenants when the property is being sold and the agreement is coming to an end. It is normally 60 days, however, it can be more or less depending on the terms of the agreement.
How do you conduct viewings with tenants?
When selling a tenanted property, you do not automatically have the right to show new tenants, another landlord, estate agents or potential buyers around the property. You will only be able to do this if it is in your tenancy agreement and if you give the existing tenant 24-hour notice in writing. Failing this, you will need to get the tenant’s permission.
What if the buyer becomes the new landlord?
If you are selling with tenants, then the buyer will become the new landlord. The original tenancy agreement will still be valid, but the new buyer will need to change the name on the agreement from your name to theirs. It is always a wise idea to get the new tenancy agreement agreed upon and signed as quickly as possible to avoid delays and disruption further down the line.
If you have just purchased a buy-to-let property and your new tenants are refusing to sign, they are within their rights to do so. If this is the case, you should write to the new tenants and inform them of the change of landlord as well as the new payment details.
Selling a tenanted property checklist
If you are selling a house with sitting tenants, then there are extra documents that you will need to be aware of:
- Signed tenancy agreement
- Safety certificates
- Information regarding the deposit protection scheme
- Condition report
- Evidence of the tenants right to rent
On top of this, your tenant’s deposit will need to be transferred to your new buyer. Using the deposit protection scheme you may be able to transfer it or you can arrange to transfer it directly to the buyer.
How quickly can I sell my house with a renter in it?
If you are looking to sell your property with a renter included then the amount of time that you spend on the open market will most likely be significantly longer than it would be if you served notice and sold with vacant possession. As you will be selling with tenants, you will need to organise viewings around your tenants and may spend a long time looking for a buyer who is interested not just in the property, but in taking over the tenancy as well.
If you decide to sell your property with sitting tenants, then a cash buyer may be the way forward. This is because a cash buyer will purchase a property regardless of location or condition. However, in return for the ease of sale, a cash buyer will offer you your property below market value.
Pros and cons of selling a house with tenants
As with any selling decision, there are pros and cons to selling property with tenants. Below, we take a closer look at some of the pros and cons of selling a house with a tenant.
A big advantage to selling your property with tenants is that you will not lose out on rental income. If you decide to evict your tenants and sell the vacant property, you will be losing out on rental income during the time that you are on the open market. You will also be having to cover the mortgage payments on the property during this time so by letting your tenants live in the property, you are not at a loss.
The flip side to this is the new buyer will receive a guaranteed yield. As they are purchasing a property with tenants already included, they will start making money on their purchase straight away.
Another advantage to having your tenants remain in the property is that it causes less disruption. Evicting tenants is never a pleasant or easy job to do, and neither is being told you need to leave your home. By keeping your tenants in the property you will help to keep disruption to a minimum. It is important to be upfront and honest about the fact you are selling, what it will mean for them and how the process will work in order to keep disruption low.
Unfortunately, if you leave the property vacant, it is at a higher risk of being damaged. This can occur through either burglary, squatting, vandalism, or even household issues going unnoticed such as leaks or lack of ventilation. Depending on the type of landlord insurance you have taken out, some periods of vacancies should be covered, but if it is empty for an extended period, then you may need to look into taking out specialist vacant-property cover.
If you are putting a tenanted property on the market, then the chances are your new buyer will be a landlord. This unfortunately limits the number of interested potential buyers significantly as there are roughly 2.6 million landlords in the UK, which is around 10% of the total 28 million households. On top of this, landlords tend to be more business-minded and often drive a harder bargain.
As we have already mentioned, sitting tenants have certain rights which can prove difficult if they do not wish to cooperate with the sale. They are entitled to ‘quiet enjoyment’ of their property and if they do not want to allow access to their home for viewings, valuations, or photographs it can make selling your home a lot more difficult.
Tenanted property sales can also be more complex. This is because there is more paperwork required for the sale, so this will need to be made available to any potential buyers. This includes documents such as EPCs, gas safety certificates, EICR and others. You will also need to arrange to transfer the deposit to the new buyer as well as any portion of the rent that month should completion day not fall on rent day.
It’s no secret that over the last few years house prices have soared across the UK. If you are a landlord who has not increased their rent to keep up with house price inflation then you may find yourself unstuck. As the value of rental properties is determined by the yield an investor can achieve from income, it can mean the figure you are asking for may not add up.
How do I sell my house with sitting tenants?
If you are trying to sell a rental property, there are 5 main ways that you can do so. Below we take a closer look at some of the ways you can sell a rental property:
If you want to sell your rented property, then the main way that you can do this is by giving your tenants notice. This way, you will be able to sell the property once the tenant leaves and with vacant possession. In order to be able to do this you will need to check the tenancy agreement to see if you are legally able to serve notice.
If you have an assured shorthold tenancy, then you may be able to issue either a section 21 or a section 8 notice.
If the tenancy agreement is a regulated or an assured tenancy, then you may not be legally allowed to serve notice. If this is the case then you may have to try a different selling option.
Wait it out
Your next option for selling a house with tenants is to wait until the tenancy is over and then sell with vacant possession. If you plan to sell this way, it is a good idea to check the tenancy agreement to ensure that there is an end date and to find out when it is. If you have a property with an assured shorthold tenancy on which it will be able to end, however, other kinds may not have an end date so it is important to check.
Ask your tenant to purchase
Another option you can take is to ask your tenant to purchase your investment property. A sitting tenant will not have the right to buy their home unless it is a local authority property. But you are able to offer them the opportunity to purchase it.
This may not always be the best option, as your sitting tenant may not want to buy your property, they may be unable to secure a mortgage, or they may not be able to afford it.
Sell with tenants in situ
Another option for selling is to sell your property to another landlord or a property investor. If this is a route that you decide you want to explore, then your new buyer will take over your tenancy or replace it with a new one, and they will become the new landlord.
This is why we have made it our mission to change the way that you sell your property. Rather than forking out for expensive legal bills and estate agent payments, we cover it for you. It’s just one of the ways that we help to take the stress out of selling.
Our dedicated team of property experts are by your side through every step of your house-selling journey, helping you to sell your new build in as little as 28 days.
So if you are ready to sell a house with tenants, get in touch today by filling out one of our free, no-obligation online valuation forms today!