Selling a property with tenants in place
Selling with a tenant is slower and reaches a smaller market. It can still be the right choice, but only if you go in knowing what it costs.
A property with a tenant in occupation can be sold, and it can be sold with the tenant staying or with vacant possession. The two are different products aimed at different buyers, and confusing them is what causes a sale to fall apart halfway through.
Selling with the tenant in place appeals to investors, who value the immediate income and avoid a void. Selling with vacant possession appeals to owner-occupiers, who are the larger market and typically pay more. Which you choose depends on the tenancy, the buyer pool in your area, and how much time you have.
What the tenancy allows you to do
The tenancy agreement governs access, and a tenant is entitled to quiet enjoyment of the property. You cannot simply walk in with viewers, and doing so can amount to harassment, which is a criminal offence.
For an assured shorthold tenancy, notice is normally two months under section 21, though the rules have changed and continue to change, and there are strict requirements about deposits, gas safety certificates and the prescribed information that must have been complied with for a section 21 notice to be valid. If any of those were not done correctly, the notice is invalid and you cannot use it.
- Give proper written notice, and use the correct form for the tenancy type
- Access for viewings must be by agreement, or with proper notice as the agreement allows — never by simply turning up
- A section 21 notice is invalid if the deposit was not protected correctly or the prescribed information was not served
- Serving notice does not end the tenancy; it is the first step in a process that can end in court
- Selling does not end the tenancy — a buyer takes the property subject to it
The effect on price and timescale
A tenanted property typically sells for 5–15% less than the same property with vacant possession, because the buyer pool is smaller and investors price in the risk of a tenant who may not leave, may not pay, or may damage the property.
The timescale is also longer, because an investor buyer needs to complete due diligence on the tenancy and the rent, and because the sale frequently has to wait for the tenant to leave if vacant possession was promised. A sale agreed on the basis of vacant possession that cannot be delivered is a sale that falls through.
The decision, and the timing of it
If you have time, obtaining vacant possession before marketing almost always produces a better price and a faster sale, because it opens the property to owner-occupiers. The cost is the void period while it is empty and marketed.
If you do not have time, selling to an investor with the tenant in place is a legitimate route, and it should be marketed explicitly as such rather than presented as a property that will be vacant. Misrepresenting the position to an owner-occupier buyer wastes weeks and costs you the sale.
Common questions
- Can I sell my house with tenants still living in it?
- Yes. You can sell with the tenancy continuing, in which case the buyer becomes the landlord, or you can serve notice and sell with vacant possession once the tenant leaves. The first is quicker but reaches a smaller market at a lower price; the second takes longer but usually achieves more.
- Do I have to tell a buyer about the tenant?
- Yes. The tenancy is a legal interest in the property and it binds a buyer, so it must be disclosed. Your solicitor will raise it in the enquiries, and concealing it would be misrepresentation. Marketing the property as vacant when it is not is the most common reason this kind of sale collapses.