A landlords guide to selling a property with tenants

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Rental property is a popular investment option. It has guaranteed returns which are normally steady over time. Over the last few years however, new legislation and a turbulent property market has made it more of a difficult proposition.

This guide will help you decide when to sell a property with tenants (or a portfolio of tenanted properties), and give you all of the information you need to get through the process.

Your options, selling a house with tenants or without

Can you sell a house with tenants?

Yes, you can sell a house with tenants but landlords do have a responsibility to not only look after their properties but also to abide by the rights of their tenants. Jump to tenants’ rights.

When selling a house with tenants the new owners typically have to honour the existing lease agreement. It’s also important to note that you can’t evict a tenant just because you want to sell the property. You would instead need to wait until the lease ended or end the tenancy agreement earlier which would require that you provide notice to your tenant in writing.

More info on ending a tenancy.

More info on grounds for eviction.

Is it easier to sell property with tenants or without?

It will probably be easier to sell a property without any tenants living in it, however it is still possible to sell while the property is occupied. It can be a financially smart option as rental income will carry on being paid to you right up to the sale, and then continue on after that for the new property owner.

Pros and cons of selling a property with tenants

Sitting tenants will limit the pool of potential buyers to other investors making a sale potentially more difficult to find. If you are selling through an estate agent they will probably suggest that the tenants are removed before the sale of the property to make it a simpler scenario on their end.  

However, selling with tenants can make things simpler in other ways. Selling a rental property with tenants means that you will not be obligated, or have the opportunity to make any sweeping cosmetic or structural changes. You will essentially just be passing on the rental property to the new owner as an ongoing investment rather than selling a future home to someone.

If you manage to find an investor looking to buy you will need to sell the property as an investment opportunity and have all of the necessary details about the rental income and yield to help buyers make an informed decision. If your property is tenanted, emphasise the benefits. A reliable tenant who pays rent on time can be a major attraction for potential investors.

Tenants’ rights in Scotland

Tenants’ rights are there to protect tenants and vary depending on the circumstances.  If a tenant is renting from a private landlord or letting agency their rights are different to that of a council or housing association.

Private landlord or letting agency

Types of tenancy:  Private residential tenancy, Assured tenancy, Short assured tenancy, Regulated tenancy

A private residential tenancy does not have an end date meaning the landlord cannot evict the tenant without an appropriate reason.

An assured tenancy is one that does have an end date. It still does not allow a landlord to evict a tenant without a valid reason.

A short assured tenancy is one where the landlord does have the right to evict the tenant without a reason, although they still need to follow the correct procedures.

A regulated tenancy gives the tenant the right to a fair rent and protection against eviction.

Council or housing association rental

Types of tenancy:  Scottish secure tenancy, Short Scottish secure tenancy

A Scottish secure tenancy is usually given to council or housing association tenants with a fixed term of 6 months or more.

A short Scottish secure tenancy has a fixed term of at least 6 months. It is sometimes provided to people with a history of anti-social behaviour or who are homeless but there are other reasons too. If neither the tenant nor the landlord gives valid notice to end it before the date specified it will automatically renew.

Differences in tenant rights in England and Wales

There are some differences in tenant rights between England and Wales compared to Scotland.

Tenancy types: In England and Wales, the most common types of tenancies are Assured Shorthold Tenancies (ASTs) and Assured Tenancies. In Scotland, the common types are Private Residential Tenancies (PRTs) and Short Assured Tenancies (SATs).

Rent control and rent increases: In England and Wales, there is no cap on how often rent can be increased during the fixed term of an AST.

Security of tenure: PRTs in Scotland have no end date and can only be terminated under specific conditions, whereas ASTs in England and Wales are typically for fixed terms, after which the landlord can regain possession more easily.

Grounds for eviction: The grounds for eviction are different in each country. In Scotland, landlords need to provide specific grounds for eviction, and they cannot simply end the tenancy at the end of the fixed term. In England and Wales, a “no-fault” eviction process called Section 21 is in place, allowing landlords to evict tenants at the end of the fixed term without specifying a reason. 

Recent landlord legislation in Scotland

In 2022 the ‘Cost of Living (Tenant Protection Scotland) Act 2022’ was introduced to help tenants by adding a temporary cap on rents. It also added a suspension on evictions and made the claiming of unlawful eviction charges easier for claimants. This was initially due to expire at the end of March in 2023, but was extended at an increased rate of 3% until 30^th September 2023.

In March 2022 the Scottish Government added legislation concerning energy efficiency, making it illegal for landlords to lease out property where the energy efficiency rating is below D. This was added to ‘The Energy Efficiency (Private Rented Property) (Scotland) regulations 2020’.

Using estate agents to sell tenanted property

Using an estate agent for selling a tenanted property is a tried and tested process. It will be possible to sell on the open market with a tenanted property but it may take a lot longer. This is why the majority of estate agents will encourage a landlord to sell with an empty property.

Using quick sale companies

Selling a tenanted property or property portfolio with a quick sale company is an easier task. They will normally have a list of approved investors with property portfolios making it easier to connect your property to one of their buyers. They will also be able to provide a traditional sale on the open market.

Determine the best time to sell property with tenants

It’s not always possible to be so precise but if you are able to, aim to sell the property when the lease is about to expire. This will give you the option of selling with or without tenants in place. This will also give potential buyers the option of moving in immediately or choosing their own tenants. However, if your tenant’s lease isn’t due to expire anytime soon, consider selling with the tenants in situ, especially if they are reliable and have a good payment record. This could be a selling point for investors looking for a property with a steady income stream.

Communicate effectively with your tenants

Clear and respectful communication is key. Inform your tenants of your intention to sell as early as possible and reassure them about their rights during this period. They will naturally have concerns about their living arrangements and their future in the property.

Be sure to communicate any changes that will occur during the selling process. This could include house viewings, photographs for marketing purposes, and inspections. You should arrange these activities at convenient times for your tenant to maintain a positive relationship.

Offering incentives to your tenant can smooth the selling process. For example, you might offer a rent reduction during the sale process or assistance with moving expenses if they choose to leave before the end of their lease.

Another incentive could be a “cash for keys” agreement, where you provide a cash amount in return for the tenant’s agreement to move out early. However, such an agreement must be handled delicately and ethically, and should be a choice that’s up to the tenant to agree to or not. Ensure you respect the tenant’s rights throughout the process.