When you buy a property with a sitting tenant in the UK, you’ll inherit their tenancy agreement, so it’s important to read all documents and understand what you’re getting yourself in for.
Buying a property is never a small decision, but buying one with a tenant already living in it can make it even more complicated.
Buying a house or flat with a sitting tenant (also known as a tenant in situ) can be a smart move if you want to quick rental income. However, it also comes with some extra rules, tenant rights and potential difficulties locking in a mortgage.
But first…
What Is A Sitting Tenant?
A sitting tenant (or tenant in situ) is someone who continues to live in a property after it’s been sold. In other words, they were already renting the property from the previous owner, and once the sale goes through, they become the legal tenant of the new owner.
In most cases, this just means that the existing tenancy agreement gets inherited by the new landlord. If it’s an Assured Shorthold Tenancy (AST), the buyer will take on the agreement as-is, without the ability to change it during the fixed term.
But if the tenancy began before 1989, it could be categorised as a regulated tenancy, which means the tenant has much stronger rights, including rent controls and longer eviction processes.
Can A Landlord Sell A Property With A Sitting Tenant?
Yes, landlords are allowed to sell properties with tenants in situ.
In fact, it’s quite common for landlords that want to sell their buy-to-let properties in the middle of a tenancy. It can also be a draw for investors as they don’t need to worry about finding new tenants or dealing with void periods.
Once sold, the buyer takes over the rental agreement that is already in place and becomes the new landlord.
Is It Good To Buy A House With A Tenant in Situ?
Buying a property with a tenant in situ could be a good idea if you want:
- Rental income from day one.
- No need to find tenants or prepare the property.
- Discounted price (normally 20-40% below market rate).
- No void period (compared to buying an empty rental).
However, it might not be such a good option if you want:
- A lot of mortgage options, as some lenders avoid properties with a tenant in situ.
- Control over your tenancy terms – as you’ll have to adopt an agreement that is already in place.
- Easy evictions, especially with pre-1989 tenants.
So, if you’re a cash buyer or a landlord who wants instant income, then the pros may outweigh the cons. However, for first-time buyers or those buying properties with pre-1989 tenants, it might not be ideal.
What To Look For In A Tenancy Agreement With A Sitting Tenant
One of the most important things to check when buying a property with a sitting tenant is the agreement you will be inheriting. Before you buy, it’s incredibly important to read the existing tenancy agreement to know what you’re getting yourself into. Things to check include:
- Start date and type of tenancy (AST vs regulated).
- Length of term and renewal clauses.
- Break clauses.
- Rent amount, payment schedule, and if the tenant is in arrears (late on rental payments).
- Who pays the rent – is it the tenant directly or a third party?
- Deposit protection scheme – finding out where it is currently held.
- Any verbal agreements that have been set by the previous landlord but might not be written on paper.
Your solicitor should also check whether the tenant has:
- A gas safety certificate (especially at the start of the tenancy)
- A copy of the ‘How to Rent’ guide
- Evidence of right-to-rent checks
- EPC certificate (minimum rating E)
- Compliance with smoke alarm regulations
- An Electrical Installation Condition Report (EICR)
How Does A Sitting Tenant Affect Property Value Long-Term?
In the short term, a sitting tenant can lower the property value by 20 – 40%, depending on the tenancy type. Regulated tenancies with lifetime rights to remain will usually devalue the property more than ASTs as they have more controls.
However, once the tenant leaves, the property will go back to its full market value. If you’re buying a property with an AST tenant and are willing to wait out the tenancy, this could mean a big boost in value, giving you a better return on investment.
If you’re looking to sell a property with a sitting tenant but are struggling to do so, get in touch with the team at Swift Capital today at enquiries@swiftcapital.co.uk to find out how we can help.
Is It Easy To Evict A Sitting Tenant?
Not always. How easy an eviction is depends on the type of tenancy:
ASTs: Landlords can serve a Section 21 or Section 8 notice (although the Renters Reform Bill may change this, so it’s worth keeping up to date with legislations).
Regulated or protected tenancies (pre-1989): Much more difficult. Eviction is only allowed for specific reasons or if the landlord can find the tenant alternative accommodation.
In general however, it’s always worth speaking to a solicitor before exploring an eviction plan, especially when it comes to sitting tenants.
Does Having A Sitting Tenant Make It Harder To Get A Mortgage?
Yes. Many high street lenders won’t grant mortgages for properties with sitting tenants as they are seen as higher risk.
However, it is possible, though you may have to provide a higher deposit or lock in with higher interest rates to get it.
What Tenant Rights Do You Need To Know About Before Buying A Property With A Sitting Tenant?
When you buy a property with a sitting tenant, you take on their full set of legal rights, which include:
- The right to remain until the tenancy ends or they are legally evicted.
- The right to quiet enjoyment of the home (you can’t just walk in unannounced).
- Protection from illegal eviction or harassment.
- In some cases, the right to fair rent (regulated tenancies).
- The right to refuse viewings unless their contract permits it.
The previous landlord’s legal obligations become yours, including any errors in documents or deposit handling, so it’s important to make sure you have everything in place before taking it on.
How To Manage The Handover Process With A Sitting Tenant Involved
If you decide to go ahead and buy a property with a sitting tenant, a smooth handover makes all the difference. Here’s what to do:
Before Completion:
- Tell the tenant in writing about the change of ownership.
- Meet them if possible to build trust.
- Review all safety certificates, tenancy documents, and rent payment history to make sure everything is in order.
At Completion:
- Serve a Section 48 notice with your contact details.
- Make sure the deposit transfer is properly handled and placed in a protection scheme.
- Let the tenant or property manager know where to pay their rent.
After Completion:
- Reassure the tenant their rights will stay the same.
- Talk to them about how you want to move forwards – ie. renewing, ending the tenancy at the end of the term or increasing the rent.
- Do your own inventory to make sure everything is covered.
Should You Buy A Property With A Sitting Tenant?
You should consider it if:
- You’re a cash buyer or working with a lender that will give you a mortgage.
- You want guaranteed rental income from day 1.
You might want to avoid it if:
- You need a mortgage quickly.
- You want to renovate or live in the property once you’ve bought it.
- You want the property value to go up significantly in the short-term.
By checking everything beforehand, buying a property with a sitting tenant can be a great investment, but it’s important to go in with your eyes open so you know exactly what you’re getting yourself in for.
If you’re looking to sell a property with a sitting tenant but are struggling to do so, get in touch with the team at Swift Capital today at enquiries@swiftcapital.co.uk to find out how we can help.