Selling a Rental Property with Tenants in Situ: A Guide for Landlords

Selling a rental property does not always mean asking the tenants to leave. You can sell with tenants in situ, which means the buyer takes ownership of the property and becomes the tenants’ new landlord.

Indeed, one property firm says 40% of landlord sales it deals with involve sitting tenants. This approach can offer a quicker and less disruptive exit, particularly when selling to another property investor. It also allows you to continue receiving rent during the sales process. However, you must respect the tenancy, communicate clearly and make sure the buyer receives all the information needed to take over properly.

Understand what happens to the tenancy

The sale does not bring the tenancy to an end. The tenant keeps their existing rights and the buyer takes over the landlord’s responsibilities.

The buyer cannot simply introduce new rent, deposit or tenancy terms on completion. They inherit the existing agreement, including its rent level, repair responsibilities and any other valid terms. You should therefore provide the buyer and their solicitor with a complete and accurate tenancy file. This should include:

• The tenancy agreement and any later variations

• The rent payment record

• Deposit protection details

• The inventory and check-in report

• Gas safety, electrical safety and EPC documents

• Records of repairs, inspections and tenant correspondence

• Details of any property licence

• Information about arrears, disputes or outstanding work

  
  

Tell the tenants in situ early

Tenants may worry that a sale means eviction, an immediate rent rise or repeated visits from strangers.

Explain that you plan to sell the property with their tenancy continuing. Tell them that their rent and other tenancy terms will remain in place unless they later change through the correct legal process.

Give them a realistic outline of what will happen, including photography, viewings, surveys and completion. Provide one named contact for questions so tenants do not receive conflicting messages from the landlord, agent and sales team.

You could also ask whether the tenants want to buy the property. A direct sale may reduce your marketing costs and disruption, although both sides should obtain independent legal and financial advice.

Agree a manageable approach to access

A tenancy gives tenants the right to live in the property without unreasonable interference. Giving 24 hours’ notice does not give a landlord an automatic right to enter whenever they choose. Tenants should normally give permission, except in a genuine emergency.

Discuss access before marketing begins. Rather than requesting viewings at random times, agree set windows, such as one weekday evening and a short period on Saturday mornings.

Other ways to reduce disruption include:

• Grouping appointments together

• Limiting the number of people attending

• Avoiding very early, late or repeated visits

• Giving more than the minimum notice where possible

• Using a virtual tour to reduce unnecessary viewings

• Asking permission before taking photographs of tenants’ possessions

Do not pressure tenants to leave the property during viewings or expect them to keep it in showroom condition. They are still paying for the property as their home.

Market the property to the right buyers

A property with tenants in situ will generally appeal to landlords and investors rather than buyers seeking a home for themselves. Market it on that basis. Make clear that the property is being sold subject to the existing tenancy. This avoids attracting buyers who later discover they cannot move in immediately.

Transfer the deposit correctly

The tenant’s deposit must remain protected throughout the tenancy. The seller, buyer and their solicitors should agree how it will transfer before completion.

The exact process depends on whether the deposit sits in a custodial or insured protection scheme. You should notify the scheme and the new landlord must make sure protection continues. 

Tenants should receive clear written confirmation of where their deposit is held and who is responsible for it. A failure in the transfer process could leave either landlord exposed to a compensation claim.

Complete the formal handover

After the sale, the new landlord must give the tenant written notice of the change of ownership, including their name and address. Section 3 of the Landlord and Tenant Act 1985 requires this notice by the next rent payment date or within two months of the transfer, whichever is later. The handover should also confirm:

• The date the new landlord takes responsibility

• Where future rent should be paid

• Who will manage repairs

• Emergency contact details

• The position of the tenancy deposit

• Any change of managing agent

Never change payment details through an informal message alone. Use a formal letter and encourage the tenant to verify new bank details through a trusted contact number to reduce fraud risk.

Your solicitor should also arrange the apportionment of rent on completion. For example, where the tenant has paid a full month in advance, the buyer will usually receive the portion covering the period after completion.

Continue meeting your obligations until completion

You remain the landlord until the transaction completes. Continue dealing with repairs, safety checks and tenant communication as normal.

Do not delay work because the property is being sold or assume the buyer will deal with it later. Apart from putting tenants at risk, unresolved repairs can disrupt the conveyancing process and reduce the price a buyer is prepared to pay.

Make the sale work for everyone

Selling with tenants in situ can give landlords a smoother exit while offering buyers immediate rental income. It can also spare tenants the stress and expense of an unnecessary move.

The process works best when you treat the tenancy as a valuable part of the sale rather than an obstacle. Keep accurate records, communicate early, agree reasonable access and manage the legal handover carefully. By protecting the tenant’s rights throughout the transaction, you also make the property a more credible and attractive investment.

By outsourcing your property management to Executive Property Management Solutions, you ensure your properties are looked after and you can take the burden of tenancy administration from your shoulders. Find out more on our Make Lettings Easier page.