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When a property changes ownership with a renter still living in the property it’s known as having sitting tenants. This can be convenient or complex. But what are your rights as a landlord?
Whether you’re looking to sell a house with tenants in situ, or are considering buying a property with sitting tenants, here’s an overview of what to expect.
A sitting tenant, or tenants in situ, is when a long-standing tenant continues living in the property after there’s a change in owner.
If they have an ongoing contract with a landlord then they have a legal right to continue living in the property.
Sitting tenant rights depend on the type of rental contract they have.
Although not common, a lifetime sitting tenant is someone who has the legal right to remain in the property until they die.
This is usually when a government or council-owned property is sold to a private landlord and existing tenants have a right to stay on with a new landlord.
A property that’s ‘sold with sitting tenant’ means that the buyer will become the landlord when the house sale completes. This can be appealing as the new landlord can take the tenants on and start collecting rent from day one.
The property purchase process is rarely smooth and can come with some difficult decisions. Particularly if you’re deciding to sell up when your tenants are still living there.
The good news is that you do have options.
Wait until the end of the tenancy
If you have a fixed-term tenancy then it’ll have an end date. So if you’re planning to sell, you’ll need to let your tenants know that you won’t be renewing their tenancy when it comes to an end.
Typically fixed-terms are for six or 12 months, but you may be on a rolling monthly agreement after this initial time period. The notice you’ll need to give depends on your agreement, as some may end automatically when the fixed term ends.
Make sure you follow this end of tenancy checklist as part of the process.
Ask your tenants to leave
If you have an assured shorthold tenancy agreement in place then you can give your tenants notice that you want to evict them. This is known as a Section 21 notice where you don’t need to give a reason for evicting your tenants. You just have to give at least two months’ notice.
However with the publication of the government’s rental reform white paper in June 2022, plans to scrap Section 21 evictions would mean you’ll only be able to ask tenants to leave with a valid legal reason. While nothing has changed yet, make sure you read more about the proposed rental reforms and what they could mean for landlords.
Sell with tenant in situ
Your other option is selling with tenant in situ. This is possible when selling to another landlord who’ll take on the property with the existing tenants. It can be appealing to landlords as it saves on the cost of finding new, reliable tenants.
On the other hand, if you’re buying property with sitting tenants then there’s a few things you’ll need to be aware of.
Legal agreements will usually be transferred into a new name at the point of sale, including any deposit protection scheme.
If an assured shorthold tenancy agreement is in place then you’ll want to draw up a new one detailing any changes such as length of tenancy and rent.
One of the first things you’ll want to do after the sale is complete is visit your tenants. You’ll need to give them at least 24 hours’ written notice, such as a text message, email, or letter.
You’ll also need to contact the tenant to let them know the change of landlord and let them know how to pay rent.
Our guide to letting out a property has all the steps you should follow as a new landlord.
There are many variables when it comes to valuing a property, but having sitting tenants can affect the sale price. For example, if there aren’t many investment buyers in your area then you won’t have as much interest in the property.
It can also be tricky if a tenancy began before January 1989, as these tenants have greater rights and would be unlikely to sign a new agreement with increased rent.
That said, you could lose rent by having your property empty while you go through a potentially lengthy sale process. In which case, you may decide that selling with sitting tenants is worthwhile.
There’s lots to consider here so it’s always best to get advice from a financial professional before making any decisions.
Landlords in Scotland should also be aware of the different types of tenancy agreements and rights.
This article is intended as a guide only. It’s important to take advice from a legal professional if you’re unsure about anything.
Do you have any unanswered questions about sitting tenants? Let us know in the comments.
Catriona Smith is a content and marketing professional with 12 years’ experience across the financial services, higher education, and insurance sectors. She’s also a trained NCTJ Gold Standard journalist. As a Senior Copywriter at Simply Business, Catriona has in-depth knowledge of small business concerns and specialises in tax, marketing, and business operations. Catriona lives in the seaside city of Brighton where she’s also a freelance yoga teacher.
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