Sitting tenants can complicate a sale, but that doesn’t always have to be the case. Find out how sitting tenants can affect your property and what you can do to make the sale process simpler and fairer for everyone involved.
What is a sitting tenant?
A sitting tenant (also called a tenant in situ) is someone who lives in a rented home that is being sold. Tenants may continue to live in the property after the sale, but this will depend on the existing tenancy agreement.
What is a tenant in situ?
Tenant in situ is another name for a sitting tenant. Technically, it refers to those with tenancy agreements made since 1989 (while tenants with contracts before 1989 are officially ‘sitting tenants’). However, the two terms are now used interchangeably.
Do sitting tenants pay rent?
Sitting tenants must still pay rent throughout the sale process. If they stop paying rent for whatever reason, you can start the process of evicting the tenant under Section 8 of the Housing Act 1988.You’ll need to bear in mind that to issue a Section 8 notice, tenants will need to be in arrears of at least:
eight weeks’ rent if paid weekly or fortnightly;
two months’ rent if paid monthly;
three months’ rent if paid quarterly or annually.
Do sitting tenants have rights?
Like all tenants, sitting tenants have rights designed to protect them – as do landlords. Those rights will largely depend on the type of tenancy agreement you have in place.
For example, if you have an assured shorthold tenancy (AST) in place, your tenant has the right to live in the property for a fixed period of time. This is usually between six and 12 months. If you don’t renew the agreement and your tenant stays on, the tenancy arrangement becomes a ‘periodic tenancy’. Essentially, this changes the contract from a fixed term to a rolling monthly agreement.
If your tenant has an assured or regulated tenancy, their tenancy rights are more comprehensive than an AST. In these examples, they may have rights of succession (where they can leave tenancy rights to relatives). They may also have the right to stay in the property indefinitely.
Most assured and regulated tenancies were agreed before January 1989, so they won’t apply to many contracts in place today.
What are sitting tenants’ rights in Scotland?
Tenants in Scotland have slightly different rights to tenants elsewhere in the UK.
Since December 2017, tenancy agreements between private landlords and tenants have been open ended rather than valid for a fixed period of time. This gives tenants slightly greater rights when it comes to security.
If you’re a landlord in Scotland, you’ll need to issue tenants with a notice to quit. You can find out more about the different types of tenancies in Scotland and tenant and landlord rights at MyGov.Scot, types of tenancies.
Do sitting tenants’ rights change after ten years?
No, tenants’ rights don’t automatically change after a certain amount of time, but the type of tenancy agreement in place will affect what those rights are.
For example, tenants with an AST don’t have rights of succession or the right to live in a property indefinitely. On the other hand, tenants with a regulated or assured tenancy might do.
Can a sitting tenant refuse viewings?
This will depend on what’s written in the tenancy agreement. Some contracts will have a clause that specifies tenants should allow viewings if necessary.
If the tenancy agreement doesn’t say anything about letting viewings take place, tenants have no obligation to agree.
In practice, even if your contract has a viewings clause, it can be difficult to enforce. If you do want to sell your rental with a sitting tenant, it’s sensible to arrange viewings with as much notice as possible while being considerate of tenants’ work patterns and other activities. Needless to say, you should not enter the property without their consent, and you need to consider your right of entry.
Can I evict a sitting tenant?
If you want to regain possession of your property, you can do this by issuing a Section 21 ‘notice of possession’. You can arrange this whether your tenant has an AST or periodic tenancy in place, but you must follow specific rules for the notice to be valid – find out more in our guide to Section 21.If you’re having problems with tenants, for instance, if they stop paying rent, you can also serve them a Section 8 notice of eviction.
Can I sell a property with a sitting tenant?
Yes. If you’re a landlord with a tenant, you can still sell the property. Of course, you’ll need to let them know that this is what you intend to do, and keep up with your landlord responsibilities throughout the sale process.
Do sitting tenants devalue a property?
In short, yes – sitting tenants do devalue a property, but by how much is likely to vary based on factors such as location. Estimates suggest a sitting tenant could negatively affect value by at least 20% for properties with an assured shorthold tenancy in place. If the tenancy agreement is assured or regulated where the tenant has greater rights, property value could be reduced by 30% to 40%.
Is it better to sell a property with or without a tenant?
If you have sitting tenants, it can be tempting to evict them before a sale. However, in the current market, it takes around six months to sell a property, but depending on the size, location and price, it could take a lot longer.
You should also consider that while selling the property empty might give you a greater chance of getting the asking price, it also means you’ll need to cover the mortgage repayments without the help of any rental income. The longer the property is empty, the more payments you’ll need to cover and the greater the risk of it being broken into or vandalised.
With all this in mind, it’s worth weighing up the pros and cons of having a sitting tenant paying rent compared to the value of lost income.
How much notice do you need to give a tenant when selling?
If you decide to sell your property with vacant possession, you can issue a notice of eviction. This could be a Section 8 notice if they’ve broken their tenancy agreement or a Section 21 notice. You can also issue both at the same time (if appropriate).Both types of notice have benefits and drawbacks, so you should consider which is the most suitable for your circumstances. For example, you’ll need to give at least two months’ notice for a Section 21 order, but in general, this is more straightforward as you won’t usually need to go to court to enforce it (so long as all your paperwork is filed correctly).In contrast, a Section 8 order means you’ll only need to give two weeks’ notice, but the tenant can contest this, and you may end up going to court.
How to sell a house with a sitting tenant
If you decide to sell your rental and have sitting tenants, you have several options:
Wait for the tenancy to end – if you’ve got an AST, the tenancy end date should be clearly stated on the contract you have in place.
Give the tenant notice – if you can’t wait for the tenancy to end or you want to give formal notice, you can issue a Section 21. In some cases, for example, rent arrears, you could issue a Section 8 notice too.
Offer your tenant first refusal – if your tenant’s been in the house for a while, you might want to give them the opportunity to buy the house from you.
Sell the house with a sitting tenant – this could mean accepting a lower asking price.
Protecting your assets and rights
A sitting tenant doesn’t have to be a complication, and potential landlord buyers might well be happy to buy a property with a tenant already in place. That said, as a landlord, you have the right to regain possession of your property if you decide to sell.
At Alan Boswell Group, we understand that being a landlord comes with a lot of responsibility, but that’s where we can help. Our award-winning landlord insurance products cover a wide range of events and incidents, including rent guarantee insurance and landlord home emergency cover.
For more information about what we offer, take a look at our landlords insurance hub. You can also call an expert member of the team on 01603 216399.
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