Purchasing a Property with Tenants In Situ

Exterior Of Victorian Terraced Houses

Most properties are bought with ‘vacant possession’, meaning that no-one is living in the property. However, in some cases, especially the rental market, some properties are bought with tenants in situ.

This means that a tenant is living in the property, who pays rent on a frequent basis, and will have an assumed AST (assured shorthold tenancy) if there is no physical one.

 

With a property like this, it becomes the new landlord’s responsibility to ensure all of the correct documents are passed to the tenants and that there is no grey area in ownership.

The main document required is a Section 48, which tells the tenants that you have taken over ownership of the property and the mailing details they need to contact you. It is always best to put a letter alongside this to explain who you are, how they can contact you, and any other relevant information such as bank details for payment of rent.

With this information, it is best to provide the up-to-date legal documents including the Gas Safety Report, EPC, How to rent guide and HMO Licence where applicable.

 

Ensuring that the tenants understand all of the changes can take time and can be complex, especially in portfolio purchases or those involving LHA tenants where the benefits maybe paid by the council.

It is advisable to find out as much information about the existing tenants as possible prior to exchange and completion. For example, reviewing the AST agreements to double check the rents being paid and how far into the tenancy they are. It is also good to find out what type of tenant is residing in the property. It could be a single professional (or multiple in an HMO), students, family, LHA tenants, pensioners etc.  Importantly you also need to check for any arrears, poor inspection reports and reports of bad behaviour.  Depending on the situation you may be advised to go for vacant possession.

 

Although it is not required to issue a new AST detailing your name, some landlords prefer this, to ensure they are happy with all of the terms and the rental amount.

The only issue with this is that you cannot give notice to evict the tenant for the first 4 months if you decide you would like to re-let the property or do renovation works.

In many cases, the new owner will give the required documents and use these as proof of notice. If increasing the rent, they will usually issue a formal rental review in which the tenant can appeal in court if the deem necessary.

 

Most properties bought with sitting tenants won’t need immediate refurbishment, so make sure you have a plan and timescale in place if a full refurb is what you intend to do.

Ultimately, make sure you know exactly what you plan to do with the property, and that this won’t be impacted by the type of tenant (if any).

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