Buying Tenanted Property

If you are buying a tenanted property there are a number of things that you must bear in mind. The process and considerations are slightly different to a regular Conveyancing transaction but provided your Conveyancing Solicitor knows what they are doing, it should not be too complicated.

Property sold subject to tenants

The seller must disclose any tenancies or licences which affect the property. It is then the buyer’s duty to check the terms of any such tenancy or licence.   It is usual practice for the estate agents to market the property as being tenanted but if they do not, the seller must reveal this information in the Seller’s Property Information form in any event

Since vacant possession is not to be given on completion full details of the tenancy must be included in the draft contract.

The buyer must be provided with accurate information in relation to the amount of rent payable, dates of rent reviews and the effect of any security of tenure legislation on the tenancies. A copy of the tenancy agreement should therefore be requested early on in the process so the buyer is fully aware of the position.

The buyer must inform the tenants in writing that they are to be the new landlord and that rent should be paid directly to them.

If you are buying with the assistance of a mortgage, the lender must be notified that the property is being sold subject to tenants.

Tenant to vacate before Completion

The position becomes slightly more complicated where there are tenants at the property but they have agreed to vacate before the purchase completes.

Firstly, the Seller must reveal all tenancies and licences that may affect the property. Your conveyancer should request a copy of the tenancy agreement early on to see what the tenants rights are.

Ideally, you would want the tenants to vacate the property before exchange of contracts so  the buyer is given vacant possession on completion. If it is agreed that the tenants are to remain post exchange but will vacate on completion, there is a certain element of risk involved.

In order to remove tenants from the property you would firstly need to check to see what type of tenancy agreement they have. Most residential properties are let using an Assured Shorthold Tenancy (AST).   Once the AST comes to an end, the Landlord can seek possession of the property, so, if the tenant is to vacate at the end of the fixed term, the landlord must serve notice at least two months before the end of the fixed term. (The landlord is required to serve at least two months notice on the tenant requesting them to vacate and this is the case even where the tenancy continues beyond the fixed term. )  The Notice must be in the correct form and the notice period must be adequate in order to ensure the Notice is deemed valid. If the tenant does not vacate by the due date the landlord will have to commence court proceedings in order to have the tenant evicted. This can prove to be a lengthy and costly process. (Note that a landlord cannot serve notice on the tenant to leave before the fixed term comes to an end unless the tenant is in serious breach of the terms of the tenancy agreement. )

It is therefore vital, that, if buying a property with tenants who are due to vacate, that the buyer requests that they leave the property before exchange of contracts.   The buyer will therefore have vacant possession on completion and can complete on a fixed date.   If this is not possible, then, at the very least, the buyer must request the seller to serve proper Notice on the tenants, prior to exchange, to leave the property so they have vacated by the time the matter completes. There should be a special condition in the contract to this effect.

If the tenant fails to leave the property on the day of completion, the seller must commence court proceedings to evict them. The buyer is entitled to seek compensation for any loss incurred as a result of the seller’s breach of contract for failing to complete on the contractual date. The seller is therefore selling with a risk where they sell a property with tenants who agree to remain up to completion. The seller should be made fully aware of the risks involved in the form of clear written advice from their conveyancer.

Get advice for buying tenanted property

This article is intended to give a brief overview only of the potential problems to look out for when buying tenanted property.

If you require in depth information and advice on landlord and tenant matters you should obtain specialist advice from a Conveyancing Solicitor. Contact us on 0330 660 0286 today.