Would you like to put your house up for sale, but currently have a tenant under contract? The law is clear: nothing prevents you from selling, but please note that certain conditions apply to protect the occupant.
If you find yourself in this situation, what are your options? What does the law say? Are you more likely to sell with or without a tenant? Can you use the situation to your advantage, or is it better to wait until the tenancy ends before selling?
Selling with a tenant: the worst-case scenario !
Imagine arranging a viewing for prospective buyers and, when you arrive, the house is untidy and dirty, people are still sleeping… or worse, the tenant monopolises the visitors to tell them about everything that is wrong and everything you have failed to repair – even if the tenant caused the damage and is legally responsible for the repairs.
This can quite literally kill a sale.
The estate agent’s role is therefore to speak to the tenant beforehand, explain how they should behave during viewings and do everything possible to convince them that it is in their best interests. All this is to avoid losing the ideal buyer!
Your tenant can also be your ally in the sale
However, selling a tenanted property can also work to your advantage. If your tenant is exemplary, has good taste and takes care of your property, or if they have been renting it for several years and want to stay, they may prove to be your most valuable asset!
They may even help persuade buyers/investors on your behalf and conduct a personalised, welcoming viewing! In this case, there is nothing to prevent you from achieving a successful sale, and the terms and obligations of the tenancy will simply be transferred to the new owner.
And what about the tenant?
The tenant has no right of first refusal over other prospective buyers unless the tenancy agreement contains a clause providing for this. Check the tenancy agreement carefully! That said, if they are interested, it could save you a great deal of effort! There is no harm in asking!
Furthermore, the law does not stipulate a limit on the number of viewings you may require them to accommodate; the arrangements must be agreed with your tenant by mutual consent.
Generally, two to three times a week, including once at the weekend, for viewings lasting two to three hours, is considered a reasonable frequency. In all cases, make sure you minimise any inconvenience to your tenant and respect their privacy.
Selling a tenanted property: what are the disadvantages?
Aside from managing viewings, the presence of a tenant limits the number of prospective buyers. Many people are looking for a property to live in themselves, usually within a short timeframe, and will not be interested in a lengthy process that requires them to manage a tenancy agreement.
However, depending on the agreement with your tenant and your personal circumstances, you may not have a choice.
Is it possible to terminate a tenancy agreement after a sale?
If it is a nine-year tenancy agreement with a “fixed date”, this means that it is registered and enforceable against third parties. The exact terms of the tenancy are transferred to the buyer, who may then terminate it under certain conditions: personal occupation, major works, or without grounds provided that they give six months’ notice. If no grounds are given, they will have to pay compensation to the tenant.
If it is a nine-year tenancy agreement without a fixed date and the tenant has occupied the property for more than six months, the buyer may give the tenant notice, provided that they give three months’ notice instead of six. Notice must be given within three months following the sale, and the buyer will have to pay compensation to the tenant if the stated grounds are not fulfilled (personal occupation or works), or if no grounds are given.
If the tenancy does not have a “fixed date” and the tenant has occupied the property for less than six months, it will be possible to terminate the tenancy without grounds or compensation.
Of course, selling a tenanted property is often a source of complications, but the owner does not always have the option of waiting. If this applies to you, make sure you fully understand the terms governing your relationship with your tenant so that you can inform prospective buyers of the options available to them.
That said, there is no point in being pessimistic: a friendly, long-standing tenant may also prove to be an ally during viewings or when dealing with prospective buyers looking to invest.
J&J Properties
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