Selling Your Tenanted Property - Guide

Updated: 30th June 2023

Selling a property, be it for personal or business reasons, can be incredibly stressful even at the best of times. But for landlords, changes in legislation, cost of living crisis and high interest rates on borrowing, now more than ever, property landlords are having to reassess their property ownership and property portfolios.

The buy-to-let market for landlords has seen a significant changes of late and according to a recent study by the Royal Institution of Chartered Surveyors (RICS) it claims that "storm clouds have gathered" over the UK housing market, with over a third of landlords in the UK now looking to reduce the number of properties they own, or sell up all together. "Interest rate rises are also impacting the rental sector and combined with looming reforms proposed in the government's Renters (Reform) Bill, landlords are increasingly deciding to leave the sector and sell up property, causing further constraints to lettings supply," said RICS senior economist, Tarrant Parsons.

If you are a landlord wanting to liquidate assets from a rental property, you are not alone and many landlords are finding themselves in a tricky situation of doing what is right for their business, but also for their tenants. Due to the challenging and difficult economic climate, this is a now common situation that many landlords will find themselves in.

Should I sell my property with or without tenants?

When selling a tenanted property – you basically have 2 options. Option 1, evict the tenants and sell the property as vacant possession, or option 2, sell it as an investment opportunity to other landlords and tenants stay in situ.

If you choose the route of option 1, there are several factors you must consider:

Easier sale:

Without tenants, you may find the property will sell easier to wider audience.

Accessible viewings

A property without tenants if often easier to arrange viewings for potential buyers.

Condition

A property with no tenants can be decorated and refurbished for sale which may improve sale price.

The Government website have up to date information regarding the eviction of tenants in England and Wales. There and new legislations coming into effect so it is important to know your rights as a landlord and the rights of your tenants. Information from the Scottish Government can be found here.

Once you have lawfully evicted your tenants, you can then proceed with the sale of the property. Bear in mind, the longer it takes to sell a property that you have evicted tenants from, this will mean no income on the property and as owner of the property, you are responsible for all bills, maintenance and upkeep. Carefully assess your finances when you ask tenants to move out, and when the property is likely to sell if you rely on rental as your main form of income.

If you choose Option 2 and sell the property with existing tenants in situ this could be a good investment for the right buyer as it will mean an income from onset of ownership. It will also mean that whilst the property is on the market, the tenants are still paying rent and is not sat vacant.

Whilst there are advantages to option 2, some buyers may be put off by existing tenants, especially if they do not look after the property. Again, weigh up the pros and cons of each option before deciding what is right for your sale.

Not matter which option you choose, there will be tax to sort, if you aren't sure what you would need to pay and when, always refer direct to the Government website for information.

Telling Your Tenants You Will Sell Your Property

If you choose option 1 and decide to evict your tenants to prepare for a sale, you must follow correct procedures or you could face prosecution. Depending on the type of tenancy agreement you have with your tenant, there are different laws to follow as described and referenced below from gov.uk:

Assured shorthold tenancies

The 2 types of assured shorthold tenancies are:

• ‘periodic’ tenancies - these run week by week or month by month with no fixed end date
• fixed-term tenancies - these run for a set amount of time

You must follow a set process if your tenants have an assured shorthold tenancy.

1. Give your tenants a Section 21 notice if you want the property back after a fixed term ends. Give them a Section 8 notice if they’ve broken the terms of the tenancy. Find out how to give Section 21 and Section 8 notices.
2. Apply to the court for a standard possession order if your tenants do not leave by the date specified on the notice and they owe you rent. You can apply for an accelerated possession order if you’re not claiming any unpaid rent.
3. Apply for a warrant for possession if your tenants still will not leave - this means bailiffs can remove the tenants from your property.

Excluded tenancies or licences

You do not have to go to court to evict your tenants if they have an excluded tenancy or licence, for example if they live with you.

You only need to give them ‘reasonable notice’ to quit. Reasonable notice usually means the length of the rental payment period, so if your tenants pay rent weekly you can give them one week’s notice. The notice does not have to be in writing.

You can then change the locks on their rooms, even if they still have belongings in there.

Assured and regulated tenancies

If your tenants started their tenancy before 27 February 1997, they might have an assured or regulated tenancy. You’ll then have to follow different rules to evict them and they’ll have increased protection from eviction.

You can get information from Shelter about:

• assured tenancies in England
• regulated tenancies in England

You can get information from Shelter Cymru about:

• assured tenancies in Wales
• regulated tenancies in Wales

Landlords have responsibilities to their tenants - you must remember it is not just a property, it is a tenant’s home. There are best practice procedures to follow to keep both landlord, and tenant happy, it's wise to follow them.

Give the tenants as much notice as possible of your intentions to sell the property

The sale may come as a shock, so try to explain your reasons for the sale as it could go a long way in making the eviction process amicable and pleasant for all involved. Be polite, courteous and respectful as being told you need to leave you home, can be a distressing conversation for a tenant and one that needs to be handled with care.

Offering the property to the tenants

If the tenant has the financial means, you could offer them ownership of the property as they may be interested in purchasing the property as their “forever home”.  Be sure to explore this option especially if the tenants have occupied the property for a long period of time.

Change of landlords

Advise tenants if the property is purchased by another landlord as an investment, they may be given an opportunity to remain in the property as tenants of the new landlord.

Keep communication channels open so tenants know how the sale of the property is progressing. Having tenants on side will prevent any hiccups occurring further down the line. Some tenants may not want to be in the property during viewings as they may find strangers viewing the property awkward, uncomfortable or disruptive. Landlords must remember, especially if a family occupies the property, that too many disturbances and viewings may make tenants leave before the sale is complete – so tread carefully.

Tenants deposits

The deposits paid by tenants to landlords at the beginning of a tenancy agreement must be protected. If the property is not sold to another landlord, then the tenants should be given the deposit back. However, if the property is being sold to a new landlord, both landlords (the seller and the purchaser) have a legal responsibility to protect deposits and transfer to the new buyer to arrange the necessary protection. The government has useful information on their site for deposit protection schemes.

All landlords should respect private renters rights and it is important to respect those rights. As a landlord, you have numerous moral obligations and tenants have the right to;

• Occupy a property that is safe, secure and maintained.
• Be part of a protected deposit scheme.
• Not be over charged through excessive rent and protected against unfair rent increases.
• All health and safety regulations, gas and electrical testing to be maintained and documented.
• Talk to their landlord and know who they are.
• Have a valid and up to date EPC (energy performance certificate)
• Have a signed ‘Assured Shorthold Tenancy’ (AST).
• Have a written agreement if you have a fixed-term tenancy of more than 3 years.
• Have a tenancy agreement that is fair and complies with the law.

The secret to selling your tenanted home is to engage in communication with tenants from the onset. Being open, honest and discussing your intentions, will result in a much easier sale of your tenanted property.

How can Spring help?

Spring’s homebuying service can assist landlords by purchasing a property when tenants have reached the end of their tenancy agreement. The ability to collaborate with Spring and choose a completion date to suit, can eliminate the risk of landlords being in possession of a vacant property for a long period of time and running up expenses associated with an empty property.

Contact Spring today to discuss how our trusted and transparent homebuying service can provide the right solution for your business needs.

FAQs

Do I have to sell my tenanted property to another landlord?

No, properties can be sold on the open market as vacant or tenanted, but it is the norm for landlords to sell untenanted, especially if it is a private buyer who wants to make it their family home. Some tenants choose to purchase the property from a landlord, especially those that are long term, so make sure you explore all options prior to sale.

How much notice do I need to give my tenants that I am selling the property?

If you want your tenants to leave, you must give them notice in a particular way, including certain information and warnings. This depends on the type of tenancy agreement in place and its terms, so you must check on gov.uk and ensure you apply the notice period relevant to type of tenancy contract in place.

Spring have a proven track record of providing easy, quick, and guaranteed solutions for landlords. To find out more about our 'Excellent' rated Trustpilot service, get in touch with us via email or call us on, 020 8629 7877.