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Can I sell my buy-to-let with tenants in place?

July 12, 2021

While signing tenants up for more than 12 months sounds like a good way to guarantee rental income, what happens if the landlord needs to sell their property?

One of the biggest perks about renting a property is the flexibility, with standard tenancy agreements of 6 or 12 months giving both the tenant and landlord the ability to alter their plans in the short term, should there be a change in circumstances.

Not every renter, however, is in the habit of chopping and changing where they live. There is a growing demand for longer tenancy lengths, with some landlords already offering tenures of two and three years. In fact, the Government would like three-year tenancy models to become the standard so renters can feel secure enough to put down roots. 

While signing tenants up for more than 12 months sounds like a good way to guarantee rental income, what happens if the landlord needs to sell their property? And what’s the approach for those with tenants signed up for a year? We look at how landlords can regain possession of a property, sell a buy-to-let property with tenants in place and, crucially, the timings and circumstances landlords need to be mindful of.

Selling with an assured short-term tenancy (AST)

Landlords can’t decide to just sell up overnight, unless their property is in vacant possession (ie, empty). Fixed-term tenants on an AST have the right to stay in their property until their tenancy ends and even then, they will need to be issued a Section 21 notice as an official way of being asked to leave. Therefore, agreeing to a term beyond 12 months needs careful consideration.

Landlords wanting to regain possession of their property also have to follow a set procedure and timeline set out by the Government. If the tenants are on a fixed-term agreement, a Section 21 notice cannot be issued during the first four months of the tenancy or before the fixed term has ended. A Section 21 notice can, however, be served at any time if the tenancy is on a rolling periodic basis with no fixed end date. If tenants want to stay on after their fixed period is over, a rolling tenancy is a good option for landlords wanting to keep their selling options open. In both cases, tenants usually receive two months’ notice of an intention to regain possession but check with us first as Covid has altered some tenants’ rights.

It is sometimes possible to regain a rental property with a view to selling before the fixed period ends but there has to be special circumstances – usually instances where the tenant has broken the terms of their tenancy agreement or the law, enabling a Section 8 notice to be served. In these extreme cases, possession can be as quick as two to four weeks.

Using break clauses

Inserting a break clause into a tenancy agreement may allow landlords to end a contract early. For instance, if the fixed period is for 12 or 24 months with a 6 month break clause, the landlord can start the process to regain their property after 6 months. If you’re starting a buy-to-let journey, ask us about adding a break clause to your tenancy agreement for maximum flexibility.

If introduced, it is hoped the Government’s three-year tenancy agreements will contain a mandatory 6 month break clause, with extra options for landlords to regain their property if they have ‘reasonable grounds’ and provided a minimum of two months’ notice.

Selling a property with tenants in place

If the tenants are happy where they are living and the landlord doesn’t want to go through the eviction notice process – or needs to sell before a fixed term ends – it is possible to sell the buy-to-let with tenants in place. It is highly likely that the buyer will be a fellow landlord looking for ready-made rental income.

Sitting tenants

It’s worth noting that sitting tenants (sometimes referred to as tenants in situ) are renters who entered into a tenancy before 1989 and have stayed in the same property throughout. This tenant group has extra rights on top of AST renters who have only been in a property for 10 months, for instance. Sitting tenants retain the right to reside in a property that’s being sold under the Rent Act 1977, so landlords in these cases will need expert lettings guidance.

If you are a buy-to-let landlord and are considering your position in the market, talk to us about your options.

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