Selling A Tenanted Property Under The New Rules

That does not always mean the tenant has to leave. A landlord considering a sale now has two main routes: sell with the tenant in place or seek vacant possession first. The better option will depend on the tenancy, likely buyer, timescale and wider portfolio plans.

An in-situ sale means the property is sold with the tenancy continuing and the buyer takes over as landlord. This route is usually aimed at another investor rather than somebody buying a home to live in.

Rent may continue during the sale, there may be no empty period before completion and the buyer receives a property with an established tenant. This can appeal to investors because the property produces income immediately, although the smaller buyer pool may affect the marketing strategy and price.

The paperwork needs to stand up to buyer scrutiny. The selling agent, solicitor and prospective buyer may need details including:

• when the tenancy began and its current terms
• the rent, payment history and any arrears
• deposit protection information
• safety certificates, licences and other compliance records
• relevant repairs and recent correspondence

Vacant possession can open the property to owner-occupiers as well as investors, but landlords can no longer rely on Section 21. The relevant route is normally mandatory possession Ground 1A, which applies where the landlord genuinely intends to sell.

Government guidance says a tenant cannot be required to leave under Ground 1A during the first 12 months of a tenancy. Notice can be served during that protected period, but it cannot expire before the 12 months have passed. Depending on when it is served, the landlord may therefore need to give more than the standard four months’ notice [1].

If the tenant does not leave when the notice ends, the landlord must apply to court for a possession order. The expiry date is therefore not a guaranteed vacant-possession date, and court or enforcement time may need to be added.

Marketing can take place during the notice period, but the property should be described accurately. Wording such as “subject to vacant possession” or “notice served” is more appropriate than implying possession is certain by a particular date.

Ground 1A is not a way to remove one tenant and replace them with another. The landlord should be able to show a genuine intention to sell, supported by records such as estate-agent instructions and solicitor correspondence.

Using the ground also brings a 12-month restriction on reletting or remarketing the property for rent, subject to limited exceptions [2]. If the sale falls through or the landlord changes their mind, they should take legal advice before advertising the property to let again.

The notice must also be valid. Errors involving the form, dates, deposit or other legal requirements can prevent possession being granted. It may be sensible to have the position checked before notice is served.

Good communication does not replace the legal process, but it can make the sale more manageable. Explain the intended route, likely timetable and how viewings will work without making promises that cannot be guaranteed. Viewings should be arranged in line with the tenancy terms and with consideration for the fact that the property remains the tenant’s home.

For an in-situ sale, the tenant should receive clear information about the new landlord after completion. If vacant possession is being sought, keep communication in writing and properly document any agreement to end the tenancy early.

The route can also affect the finances. A tenanted property is likely to be marketed mainly to landlords, while vacant possession may reach a wider market but create a longer period without rent.

Before committing, check the existing buy-to-let mortgage for early repayment charges and consider how the sale fits with any portfolio restructuring. A broker can help assess the mortgage implications if the proceeds will reduce other borrowing or fund another property.

Selling a tenanted property is still possible, but the tenancy needs to shape the plan from the start. Establish the paperwork, buyer market and likely timetable before making promises to a tenant or purchaser, and take legal advice where Ground 1A is being considered.