Being a landlord can be stressful.
There are many issues with property, regulations, and tenants to deal with.
To do this, you have to learn a few new words and concepts.
Read on to learn about the most essential of these – a sitting tenant.
What is a sitting tenant?
A sitting tenant (also known as a tenant-in-situ) is a tenant who continues to rent a property which the landlord will sell.
This situation often occurs because there is an ongoing contract. (I.e. the tenant has the right to continue living in the property for a longer period of time).
Sitting tenants have the same rights as regular tenants.
One of these is the right to quiet enjoyment. This can sometimes make hosting viewings and renovations difficult.
Landlords must tell sitting tenants that a new landlord will be taking over. After all, they may have concerns about who will take over and if their rent will rise, etc.
Landlords selling with sitting tenants
Most landlords wait until existing tenant contracts end before selling their property.
When a landlord sells a tenanted property, it will typically devalue it.
This is a major factor why landlords will wait for the property to be vacant before selling it. This is so they can get a higher price.
Different tenancy types can have an effect on the house selling process.
- Non-assured shorthold tenancy. The landlord is not required to serve a Section 21 or Section 8 notice to bring the tenancy to an end. The landlord is allowed to simply insist on the tenant leaving at the end of the fixed term period.
- Assured shorthold tenancy. Under this agreement, there is an initial ‘fixed term’ agreed – which is typically set for 6 or 12 months. Once the fixed term has passed, the landlord is able to provide two months’ notice to regain possession of the property.
Does a sitting tenant devalue a property?
Yes, a sitting tenant reduces the value of your property.
The consensus is that selling a property with a sitting tenant can reduce its value by between 20 – 25%.
This is the case for a temporary agreement, such as an assured shorthold or periodic tenancy.
If a sitting tenant won’t leave the property, it will devalue the property even further, to between 30 – 40%.
A house with a sitting tenant is less valuable due to:
- The inconvenience of dealing with the sitting tenant
- The likelihood the property is in worse condition than a non-tenanted property
- The reduction in options available to the new buyer. For example, their ability to renovate and rent out the property in a short period of time.
How to navigate a sitting tenant
If you are committed to selling a tenanted property, bear the following in mind
Reduced price
Iif you want to sell your property quickly, you may need to be willing to sell your property at a reduced price.
After all, most potential homeowners will view sitting tenants negatively. Even if the tenants have behaved well for a long period of time.
Communicate with your tenant
Always maintain clear and consistent communication with your tenant throughout the house-selling process.
Even if you do not have a positive relationship with them, giving them sufficient notice of house viewings, or updates on the sale of the house, is both a legal and moral duty.
Get legal advice
Your sitting tenant has rights which you must adhere to. These will vary depending on the tenancy agreement that is in place.
Bringing a legal expert on-board to help you throughout the sale of your property can save you huge amounts of time (and money) in the long-term.
Consider a cash sale
Finally, you should remain open-minded to the possibility of a cash sale.
As properties with sitting tenants are considered by lenders to be high risk, not all lenders offer mortgages – and those that do will have less favourable terms.
In this instance, selling your property to a cash house buyer may be a more convenient step. You should remain open-minded to this route, as you won’t necessarily receive lots less for your property than you would’ve done on the open market.
Selling your property without a sitting tenant
If you are selling your property without a sitting tenant, then there may be other questions which you need to answer.
For example, our blog on “Do landlords need to pay council tax when a property is empty” provides a clear answer to a slightly less common property question. Click on the link to read our blog on this subject, or browse our website for more!
