Buying a Tenanted Property
When a property is tenanted on a short-hold tenancy it is possible to sell it. In order to do this there are two choices:
1. Subject to Tenancy
If the property is sold with the tenancy agreement in place this is what a subject to tenancy sale is. The property will remain occupied by the tenant who will pay rent after completion to the new purchaser.
2. Vacant Possession
If the property is tenanted this will come to an end and the tenant will leave prior to the completion of the sale.
If you are purchasing a tenanted property you need to find out which of these two options it is sold with.
Vacant Possession Purchasing Guide
When purchasing a property which is tenanted and sold as vacant possession there can be complications that arise. If the tenant does not want to leave the property the timescale can be lengthy for completion to take place.
One thing which can hold a tenanted property sale up is gaining access for the surveyor. It cannot be granted until the tenant has allowed. The seller will have to contact the tenants giving them 24 hours’ notice. If a tenant’s work does not allow them to be at the property during work hours, this can be problematic. One way around this would be for the tenants to allow the seller to meet the surveyor at the property to give them access. A number of tenants do not like this though and will not grant access unless they are there.
The tenancy agreement gives an exclusive occupation right of occupation to the tenants. This is a legal right and is viable until the tenancy agreement is terminated. This right is in place even when the agreement is about to expire. They can remain in the property until they have been served a possession notice. If they so wish, they can stay in the property until the seller has managed to obtain a court order.
The best way to purchase a tenanted property with vacant possession is to wait until the tenancy has been terminated. You should hold off exchanging contact on the property until you know the tenant has vacated the residency. By doing this the purchaser can then be certain that there will not no complication to get full possession.
Once the contacts have exchanged when the property has vacant possession, completion will normally take place soon after. An agreed completion date will be set by the conveyancers, which both the seller and buyer have to agree on.
If an agreed fixed date for completion is set prior to the property been vacated by the tenant problems can occur. The purchaser has the right to delay the completion and could sue the seller or pull out of the sale.
On-going Tenancy Purchasing Guide
Purchasing a property that has on on-going tenancy agreement needs to be handled by an experienced conveyancer. It is because there are a number of issues which could arise. They need to be dealt with by someone who has an understanding and experience in this field. Below are steps which need to be followed in order to ensure a smooth transaction.
When finance is required to purchase the property a buy-to-let mortgage is needed. A standard residential mortgage is not allowed to be used when the property is let. Purchasing a property with the wrong type of mortgage is against the law.
When purchasing a house which has a tenancy the conveyancer needs to be informed. The work carried out by the solicitor to transfer the title is the same as a normal transaction. There will be additional work though that they need to carry out.
The buyer solicitor will need to inspect the tenancy agreement and all other details about the tenancy. If the seller does not have a copy of this they can obtain a copy through the letting management agent.
One of the most important aspects the solicitor will want to check is that all rental payments are currently up-to-date. They will also want details about the deposit the tenants paid and where it is held. Full details of all the tenants will need to be supplied so that they can be checked against the names of the people currently occupying the property.
All correspondence or notices served will need to be disclosed to the seller’s solicitor so they can see if there have been any issues. A copy of the inventory will need to be supplied so that items which are being included in the sale are known.
On the day of completion an arrangement for the handover will need to be made for the tenancy. The best time for this to take place is on the day that the rental payment is made. This will mean that the buyer and seller will have no rental income that has to be apportioned.
If the completion occurs on any other day an arrangement will be arranged by the conveyancers to credit the monies owed for the timescale of rent. If there is a letting agency managing the property the buyer could carry on using them. This way no changes will be needed to be made for the arrangement of payments. If the buyer does not want to retain the services of the agency, a letter of authority will be required from the seller. This will request that the tenant pays the rent directly to the new owner.
An agreement for the tenants deposit will be arranged by the buyer’s conveyancer. This will be dependent on what scheme has been used to hold the deposit. When the tenancy comes to an end the buyer will want to be sure that any repair costs, cleaning or rent arrears are taken from the deposit.
Once completion takes place the tenants will need to be notified of the change of ownership. If any new arrangements need to be made for the rental payments this is done then. If the buyer is retaining the letting agency they need to check that the records are handed over correctly. If it is not it could end up with the rent continues to be paid to the seller.
When purchasing a buy-to-let property advice should be sought to understand the laws for tenancies. There are lots of rules and regulations which need to be adhered to for letting properties. Your solicitor will be able to give you general advice but you should seek further information from a letting specialist.
When purchasing a tenanted property, it is more complicated that a residential sale. Most experienced conveyancing companies will have experience in handling this type of transaction. All of our conveyancing companies you can compare on our site are experience licenced solicitors.