Selling a property with sitting tenants

Selling a property with sitting tenants

Life is unpredictable and sometimes residential property owners need to quickly sell their houses or flats, but they worry that's impossible if they have sitting tenants whose rents are capped and can't be evicted. It's understandable if you think having these tenants might prevent putting your home on the market - but the truth is that a sale is still possible.

What's the definition of a sitting tenant?

The first thing to know is that sitting tenants are not the typical tenants who might have yearly or month-to-month leases that include clauses saying they can be evicted in certain circumstances. In contrast, sitting tenants (sometimes also called protected tenants), are already living in a property and by law are entitled to do so for their lifetime while paying a rent at a 'fair' level that is typically significantly below the average market price.

Those rights come from the Rent Act 1977, and the law also says that sitting tenants cannot be evicted, which could be an issue if you want to sell the house or flat that they are renting. It's said that there are more than 100,000 homes across the United Kingdom with sitting tenants.

Can properties with sitting tenants be sold?

The short answer is yes, because there are no legal limits on such sales.

The longer answer is that you won't be pursuing a "typical" house sale in which your home will exchange hands to the person that buys it and then they move in. Instead, your potential list of buyers will be narrowly limited to prospective investors. Selling a house with sitting tenants does not typically break the tenants' rights to stay in the property at the fair rent with no risk of eviction. Therefore, the person who buys the home will essentially become the new landlord of the sitting tenants rather than moving in themselves once the purchase is complete.

What options are best for selling a home with sitting tenants?

One highly case-specific option for selling could be to trying making a cash offer to the sitting tenant for vacating the property. But this will depend entirely on the individual circumstances and the whims of the tenant. They are under no obligation to accept any cash offer to vacate, and sitting tenants can often ask for payments that are far above what homeowners can either afford or are willing to pay. However, if a tenant accepts such a payment then the home will now be vacant and can be sold through many of the traditional options for selling properties.

Another option is to auction the property while leaving the sitting tenant in place. Selling the house or flat through auction will still not affect the sitting tenants' rights, which is why the only people likely to be attending this auction are investors eyeing it as a long-term investment.

Auctioning brings a positive benefit of date certainty for selling the property, so if you're a homeowner looking to sell quickly it can be reassuring to know the precise date of sale.

However, selling your house or flat at auction can sometimes be considered a gamble because you might not get any more bids at all or indeed just achieve the reserve price. If you settled on a relatively low reserve price as a way to generate interest in the property, you run the risk of nobody bidding any higher and having to accept a value that is less than you want.

Of course, this approach can sometimes pay off if a house generates a lot of interest and competitive bidding hikes the value to your goal level or even higher. But the uncertain outcome means that auctioning is not ideal for people with specific financial requirements.

A third and very popular option is to work with a licensed property buying company that specialises in buying properties with sitting tenants direct from owners. LDN Properties, which launched in 2003, is a leading example with its extensive history of making offers to homeowners for selling without charging any fees.

This approach has a number of benefits, including the fact that most of these sales are quick, so it's perfect when you're looking to sell in a hurry.

Working directly with a property buying company also has the advantage of cutting out any middlemen, because you won't have to pay any estate agent fees or auctioneer fees. It's an easy way to reduce the hassle involved with selling your house. Indeed, LDN Properties is among those companies that don't charge fees when buying homes.

Selling your house is a major decision, and even more so when having to consider sitting tenants. But it can be a relatively simple process if you pick the right option.