A landlords guide to sitting tenants

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?

The term sitting tenant or tenant in situ refers to a tenant in occupation of a premises but it particularly refers to one in residence when a property changes hands. Renting is on the rise in the UK, both in relative and absolute terms, so this situation is occurring more and more frequently.

If you’ve got a rental that you decide to sell, sitting tenants can be a worry. But for prospective buyers who are also landlords, purchasing a ready-made let complete with tenants can be a bonus.

Can I sell a property with a sitting tenant?

Yes, if you’re a landlord with a sitting tenant, you can still sell the property. Of course, you’ll need to let them know that this is what you want to do.

Do sitting tenants have rights?

Sitting tenants, like all tenants, have rights that are designed to protect them – as do landlords. The rights your tenants will have will largely depend on the type of tenancy agreement you have.

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 something called a ‘periodic tenancy’. Essentially, this changes the contract from a fixed term to a rolling monthly agreement.

If you want to regain possession of your property, you can do this by issuing a Section 21 notice. You can arrange this whether your tenant has an AST or periodic tenancy in place, but you must follow certain rules for the notice to be valid – find out more in our guide to Section 21.

If your tenant has an assured or regulated tenancy, their tenancy rights are more comprehensive compared to 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 largely won’t apply to many contracts in place today.

Can a sitting tenant buy a property?

Tenants don’t automatically have the right to buy a private property from landlords. The only time tenants do have the right to buy, is if the property is owned by the local authority.

As the landlord you can offer your tenant first refusal if you want to sell but this is not something you must do by law.

Do sitting tenants’ rights change after 10 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, do.

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 are 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 devalue a property?

In short yes – sitting tenants do devalue a property. If you have sitting tenants, it can be tempting to evict them before a sale but it’s sensible to weigh this up in relation to the value of lost rent.

According to data, it takes just over two months for a property to sell. Depending on the type of property you own, its location and of course the price, that could take a lot longer.

Selling the property empty might give you a greater chance of getting the asking price, but 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.

Faced with this, you might decide to try and sell the property with a sitting tenant instead.

How much does a sitting tenant devalue a property by?

This will ultimately depend on the property itself, how much it costs and what a potential buyer is looking for. For instance, if a buyer is also a landlord, a reliable sitting tenant with all the appropriate reference checks through a top referencing company might not be an issue at all.

Nevertheless, some reports estimate that properties sold with sitting tenants based on tenancies created before January 1989 (i.e. not an Assured Shorthold Tenancies, but ‘lifetime’ type tenancies), sell at auction for up to 75% to 85% of their vacant value.  If Assured or Assured Shorthold Tenancies are in place, it is unlikely to have a major impact on the sale price.

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 – bear in mind that this could mean having to accept 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 do 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 five-star rated insurance products cover a wide range of events and incidents, giving you peace of mind when you need it most.

For more information about what we offer, take a look at our landlords insurance hub or call an expert member of the team on 01603 216399.

Read more: Guide to landlord risks | The cost of being a landlord