What are the sitting tenant's rights when selling house?
The term sitting tenant (also known as tenant in situ) refers to a tenant living in a rental house that is being sold from one landlord to another. The tenant remains on the property, and their rent obligations are passed on to the new landlord.
While a tenant paying renting from day one with no finders fee is appealing to a landlord, there are risks when buying a property with a sitting tenant, such as taking on a bad tenant. In addition to the peculiar historically protected tenancies, there are risks a landlord needs to understand when buying a property with a sitting tenant.
Sold with sitting tenant meaning
This means the landlord is selling their property with the tenant still living there. The estate agent will often advertise this within the listing on Rightmove/Zoopla.
This is advertised as a benefit for the next landlord as they'll receive rent from the first day they complete buying the rental property. Any rent paid up until the day of completion is apportioned by the seller. For example, £1,000 rent, if you complete on the 15th of a 30-day month, £500 is retained by the seller, and the seller will pay £500 to the buying landlord.
What rights does a sitting tenant have?
The tenant's rights don't change when the landlords change. The new landlord must:
- Adhere to the terms set out within the Tenancy Agreement.
- Keep the tenant deposit in a Deposit Protection Scheme (providing updated information to the tenant).
- Renew any furnished items that are damaged/broken.
- For eviction, provide the appropriate notice based on the type of sitting tenant. For example, a tenant with an Assured Shorthold Tenancy requires a Section 21 Notice giving a 2-month notice of the tenant's tenancy being ended. This can only be served at the end of their fixed term.
- Before any inspection of the property, prior notice of 24 hours must be given, although, in emergencies, this could be immediate access. The tenant has the right to stay in the property during any repairs.
- Up-to-date EICR, annual boiler maintenance, working smoke alarms and CO2 monitors.
Breaching a tenant's rights could lead to legal proceedings unless they are remedied.
What are the risks of buying a property with a sitting tenant?
- Faulty Tenancy Agreement. The previous landlord may have been using an outdated tenancy agreement or may not be up to date with current legislation. The new landlord must rescind the faulty agreement and draft a new one with the tenant's consent.
- Missing Legal Documents. No Electrical Installation Condition Report (EICR), no boiler maintenance check, no Right to Live evidence, no EPC. The buyer's solicitor should pick up on this during the conveyancing process.
- Furnished Rental in Bad Condition. The property and furnishings could need repair or replacement. Again, you can spot this during the inspection and check the inventory log.
- Bad Tenant. Evicting a tenant is a long and costly process, so if you take on a difficult or demanding tenant, you could be taking on the previous landlord's headache. To avoid this, see the previous landlord's references and ask if the tenant has had any disputes.
- Landlord tried, and failed to evict the tenant. If a landlord has attempted to evict their tenant, they should declare this during the enquiry phase of the process. To avoid this, speak to the tenant directly to determine how they enjoy the rental.
- Faulty smoke and CO2 alarms. A landlord must have full working smoke and CO2 alarms, sometimes required to be connected to the electricity supply and not just on battery.
- Not all occupiers are on the tenancy agreement. Check that all occupiers are on the tenancy agreement, or else you may have a tenant claiming to be legally allowed to remain in the property.
Click to read additional information about Buying a House with Tenants and Selling a Rental Property
What are the different types of Sitting Tenants?
Tenants with an Assured Shorthold tenancy (AST)
This is England and Wales's most used tenancy agreement if you rent from a private landlord. You can't have an AST if:
- Letting a commercial premises or holiday let
- Your tenancy began before the 15th January 1989
- The rent exceeds £100,000 or less than £1,000 per year
- You rent from the council
Tenants with an Assured Tenancy
These are granted by private p[property owners such as housing associations or Housing Trusts. If your tenancy started between 15th January 1989 and 27th February 1997 it could be assured.
Tenants with a Regulated Tenancy
These are rare tenancies as they mean the tenant has lived in the property since before the 15th January 1989.
- The landlord cannot evict the tenant unless they get a court possession order, which will only be granted in certain circumstances.
- The spouse of a regulated tenant can take over the regulated tenancy on the death of that tenant - this is called the right of inheritance. They then also become a regulated tenant. A regulated tenancy can only be inherited twice; on the second inheritance, the person who inherited becomes an assured tenant (not an AST). Assured tenants have similar rights to regulated tenants but cannot pass the tenancy on again.
- A family member can also inherit the regulated tenancy if they lived with the deceased regulated tenant for at least 2 years - they become an assured tenant.
- The landlord and the tenant can apply to the rent officer for a fair rent to be registered.
- Once the landlord has registered the rent, they can't increase it until it is reviewed or cancelled.
- Even if the landlord hasn't registered a rent, they can only increase it under certain circumstances.
- The tenant has a right to rent a room to a lodger unless their tenancy agreement explicitly states that they must consult their landlord first.
What should a landlord do to sell a vacant possession?
Vacant possession, which is what most sales and purchases are, means the property is empty of tenants and all personal possessions. If the new landlord doesn't want to risk buying the property with a sitting tenant, then the seller will need the tenant to vacate the property (if that is possible).
Assured Shorthold Tenancy. To evict a tenant, you need their fixed term to have expired so you can serve them with a Section 21 Notice giving them 2 months to vacate the property. If the tenant doesn't vacate by the notice period, you apply for an Eviction Notice. You can evict the tenant before their fixed term ends using a Section 5 Notice if they breach their AST for certain reasons, such as failing to pay rent.
The tenant is protected or regulated. You may find it very difficult to evict them because of the different legal protections they have. Click to view the list of possible grounds you might have for evicting a protected tenant. These include the tenant allowing the property to be used for moral or illegal purposes.
If the tenant behaves reasonably and pays their required rent regularly, you might have to offer them cash to move out - and there's no legal force on them to accept the cash.
If you offer cash, it's typical to offer a tenant half the difference between the value of the property subject to a regulated tenancy (75%) and the value of the property with vacant possession, so this sum might normally be around 12.5% of market value.
Caragh is an excellent writer and copy editor of books, news articles and editorials. She has written extensively for SAM for a variety of conveyancing, survey, property law and mortgage-related articles.
