Why would vendor want us to take on tenants for next academic year without signed TA?

[mcdonaa8]

Bit of a weird one this.

We are buying an HMO property with tenants in situ. Their current tenancy ends at the end of June and we expect to complete the purchase mid-way through June (a couple of weeks before the tenants are due to move out). It has to complete by then or our mortgage offer will run out. Throughout the process, the vendor has maintained they have signed tenants for next academic year as well (new TA would start July 1st), however week after week they fail to produce any evidence of this. There is no reference to any of this in the legal paperwork.

Additionally, the vendor has been caught telling a number of fibs throughout and we are concerned something doesn't add up.

Recently we negotiated a reduction in price due to the rent achieved being lower than advertised. However, now the vendor has come back and said, because we agreed a lower price, will we confirm that we will take on the future tenants for this new TA (that nobody has seen) starting in July? We have tenants lined up that could take it so we are not worried about an empty property, we just want to know what is going on one way or the other.

In this context, we keep thinking:

1) Why would the vendor care if we took on their future tenants after the sale has been completed if a TA has not been signed?
2) If the TA has been signed (as claimed), we would have to take them on anyway, so why ask us if we will agree to it?

Red flag?

We strongly suspect given some of the other incidents the TA has not been signed, and that the landlord is trying to get it done while delaying us (this is exactly what happened with the gas certificate - week after week they swore blind they had one and it was sent, but when we finally got it the date was for a couple of days before).

What possible reason could a vendor have for behaving like this? Could it be if they back out from a letting agreement they will pay a penalty? Could it be they are hoping to rent it to a related party? It doesn't make any sense and as buyers it doesn't sit well with us.

Does anyone have any ideas? Are we worrying over nothing?

Thanks

[theartfullodger]

Welcome to LLZ . Huge red flag They are either very stupid or bent or both

I'd probably walk away unless something positive appeared very fast .

Been landlords long? Much HMO experience? Any training courses - if so what attracted you to this HMO?

[mcdonaa8]

Hi thanks for the reply.

We've got 4 HMO properties and have been operating as ltd 6 years. Apart from the Rent Smart Wales stuff which we have to do no other training. My business partner was a landlord for several years before that though, he's also an architect which is good for dev work, and I've run other ltd companies so we aren't completely inexperienced.

This was meant to be our 5th and we were attracted due to the performance of our other properties in the area/street which are almost identical. We have a good model upgrading the properties in various ways and have been achieving good returns and to date no horror stories with the tenants (touch wood).

All other acquisitions have been without tenants though, and while we expected to be messed about so the vendor gets to keep more rent, my gut tells me something is off as it doesn't make sense and lies have already been uncovered. I was hoping there was a simple explanation we hadn't thought of as we've been going around in circles discussing it.

I guess the dilemma for us is how to play it with the vendor now. Ultimately if we can agree to the sale without this future TA, the property is good and the financials stack up.

[nukecad]

It's not unusual for landlords to contract up to 12 months early for student lets for the next accademic year.

These are not TA's but contractual agreements to grant a TA on a future date.

If your seller has made one of these agreements with a bunch of students then he will be in breach of contract if he doesn't have anywhere to house the contracted future tenants.
Unless you buy that contract off him as part of the sale then that's his problem not yours.

Something important to watch if you do agree to take his contracted potential tenants -

We've had a few posts here from LL's who have contracted fixed price 'all inclusive' lets for the start of next accademic year and are now contractually stuck with that fixed price even though utility prices have now gone through the roof.

Your seller may be trying to offload such an agreement on you.

[mcdonaa8]

Very useful. Many thanks.

[loanarranger]

Given everything you have reported and the responses already received my advice would be STAY CLEAR there are too many red flags to proceed. If he is genuine in his intention to sell then there should be no issues in producing the relevant information that you are seeking.

[jpkeates]

If the current tenants don't move out, they will continue as tenants.
It's possible that they've told their landlord that that's their intention, so there's a possible new (possibly periodic) tenancy, that requires no new paperwork.
That fits the scenario, but it seems weird that the vendor isn't able to communicate that.

It should be possible to find out by asking the tenants.

If there is a new tenancy agreement that is meant to start on July 1st and it has not begun when you complete, the contract will remain with the vendor (who would probably be in breach) and have nothing to do with you.
You don't "step into the shoes" of future tenancies that haven't begun yet.

I can't imagine your conveyancer is going to allow you to enter into a sale with that kind of condition attached, so I suspect that the vendor's conveyancer either doesn't know about the idea or they're just trying it on.

[mcdonaa8]

Thanks for all the responses.

jpkeates - This bit I did not know:

If there is a new tenancy agreement that is meant to start on July 1st and it has not begun when you complete, the contract will remain with the vendor (who would probably be in breach) and have nothing to do with you.
You don't "step into the shoes" of future tenancies that haven't begun yet.

I assumed if there was a signed tenancy agreement for the property we would have to honour it but now you say it that makes perfect sense. Our understanding from the vendor is that this is indeed a new tenancy with different tenants, but who knows given the inconsistencies to date. Your other explanation is also entirely possible.

On Friday morning we sent an ultimatum to the estate agent. By COB tomorrow the vendor must produce the (claimed) signed TA or agree to the sale without it on the basis we would not be taking on the new tenants in July. If neither happens we walk away (and we absolutely will).

Hopefully this approach will cover us either way. Thanks again.

[jpkeates]

On Friday morning we sent an ultimatum to the estate agent. By COB tomorrow the vendor must produce the (claimed) signed TA or agree to the sale without it on the basis we would not be taking on the new tenants in July. If neither happens we walk away (and we absolutely will)

I still don't think your conveyance would advise (or maybe even accept) such a condition for the purchase.

[mcdonaa8]

Quick update. After weeks of wasted time the signed TA suddenly materialised this morning. I can't see anything wrong with it - definitely new tenants, bills excluded etc. Have send to conveyancer and will let them do their job. Thanks