Buying a Property with tenants

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    Buying a Property with tenants

    Hi Everyone,

    What are your views about buying a property tenanted? I wish to keep the tenants on. Assured Shorthold Tenancy. Has anyone got any experience of doing this? Good or bad? The property is currently fully managed by a large national agent and this agent is the one selling the property. I have met the tenants and like them. They have been there for 2/3 years. However, I also have the option to buy the property vacant.

    Thank you so much for any advice.

    Laura

    #2
    That the owner is willing to sell, probably for a lower price, the property with tenants in it suggest that there very well may be a problem with his paperwork such that any s21 would be invalid: So yours might be also, so impossible/v v hard to evict by s21.

    Possibly resolved by offering tenants a new tenancy, with all the right paperwork, at a LOWER rent.... (The big value prize is eviction..)
    I am legally unqualified: If you need to rely on advice check it with a suitable authority - eg a solicitor specialising in landlord/tenant law...

    Comment


      #3
      Hi theartfullodger,

      Thanks very much for your reply. I really appreciate it. The property was advertised with vacant possession and I have the option of this on completion but because I like the existing tenants and they appear to be very settled there and maintaining the place, I am considering letting them stay on. Could this still mean a problem with the s21? Thanks again.

      Comment


        #4
        Three issues.

        One is that the vendor has very little chance of getting vacant possession in any kind of timely manner without the co-operation of the about to be homeless tenants.

        I've bought a property with tenants in and I wouldn't do it now. The regulations about what you have to be able to show you've done at the start of the tenancy means that you are reliant on the tenant not disputing any notice, because the seller isn't going to be around and you can't be sure anything that should have been done was done.

        If you are borrowing to buy, the lender will (almost certainly), want vacant possession.
        When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
        Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

        Comment


          #5
          You might be able to get an affidavit from the tenant that they received the required documents, are happy that their deposit was properly protected etc as part of the exchange process.
          If the tenant wants to stay, they might be happy to do that to be able to continue living there.

          There is a risk that anything that they do might be seen as being agreed under duress (I guess).
          When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
          Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

          Comment


            #6
            Yes I agree with jpkeates and be very careful with the deposit ect like he says make sure all paperwork is right -
            I would not buy with tenant in situ , can lead to problems

            is the tenant up-to-date with rent ?
            most mortgage companies will want vacant posession , unless your buying for cash
            if they are such good tenants is there any reason why this company wants to sell ?

            Comment


              #7
              Hi jpkeates,

              Thank you for your message. I really appreciate it. Regarding the regulations about what you have to be able to show you've done at the start of the tenancy and there being a risk to me as I was not the owner when the tenancy began. Would this be reduced because the vendor has let it out through a large national agent using their fully managed service from the very beginning of the tenancy? The agent are members of NAEA, ARLA, NALS etc. Or would this still not mean anything to me? I have been told not to trust an agent, which of course I never would.

              Would I be in a position to be able to keep the tenants on and sign a new tenancy agreement with them? So everything is fresh and legally correct. I am guessing this would be difficult though as they are the seller's tenants until completion day?

              Thank you so much again.



              Comment


                #8
                "Large national agent" does not necessarily mean that they know what they are legally required to do.

                If you are happy with the rent and the price you will pay, then consider the following, else decline to take on the tenants.

                If you are not aware of all the legislation that applies to tenancies, then decline to take the tenants; you should not be considering buy to let.
                Otherwise read on.

                Choose a conveyancing solicitor that understands landlord and tenant law and make it clear both orally and in writing that you are relying on them to
                • determine if there is any failure by the current LL that could cause you any problems (financial or procedural) if you buy with the T in place;
                • advise you on the effects of any procedural problems and how you might mitigate them;
                • advise you on the maximum financial cost you might incur, so that you can seek an appropriate reduction in price.

                PS the letting agent is the seller's agent. You do not 'take on' them as your agent unless and until you make an agreement with them.

                Comment


                  #9
                  Thank you very much, Alice.

                  The guy who owns the property I am buying used to live in it himself with his wife and young kids. He's a local guy and I know someone who knows him. He bought it in 2003 but as his kids got older he needed more space. He tried to sell it (I believe in 2009/2010) but properties then were just not selling so because he could afford to he decided to just go ahead and buy another larger property down the road from this one (he still lives in this property now) and rent this one out. I don't think he ever particulary wanted to become a landlord. I am guessing he is selling now as the prices are the highest they have ever been (the property is in the north west) but of course I don't know that for sure. The property is available to buy vacant too but it was just me wanting to keep the tenants on as I have met them and liked them and they appear to be maintaining the place. I didn't think about the downsides to this though.

                  I have been told by the agent that they pay their rent on time, but of course, that might not be the case and I would need this legally confirming by my conveyancer? I am a cash buyer hence didn't know about lenders now insisting on vacant possession. Silly me! It's really useful to know that thanks. If it were you, after hearing all this, would you insist on vacant possession? Appreciate you still don't know all the facts/haven't seen what I am buying.

                  Thank you again for your time.

                  Comment


                    #10
                    Many (most?) tenancies are properly set up. legally compliant, and have good tenants.

                    If this is one of those, then go for it.
                    You just need to ensure that it is one of those.

                    Comment


                      #11
                      Originally posted by LauraLondon View Post
                      Regarding the regulations about what you have to be able to show you've done at the start of the tenancy and there being a risk to me as I was not the owner when the tenancy began. Would this be reduced because the vendor has let it out through a large national agent using their fully managed service from the very beginning of the tenancy? The agent are members of NAEA, ARLA, NALS etc. Or would this still not mean anything to me? I have been told not to trust an agent, which of course I never would.
                      The risk is essentially that you are trusting that:
                      1) The landlord did everything that they were meant to when the tenancy began (protected the deposit and served the PI within the deadline, made sure the gas safety certificate was in place and the checks have been carried out etc).
                      2) The tenancy agrees and won't try and argue that they weren't if you serve notice under s21. Because you won't be able to assert with any confidence that the things were done, because it'll be your word against the tenant and your word will count for less because you weren't there.

                      You'll also need to make sure the deposit is properly managed in the sale/purchase.

                      You'll also have to decide what to do about the agent, with whom you have no contract at this point.
                      They may see an opportunity to renegotiate.

                      Would I be in a position to be able to keep the tenants on and sign a new tenancy agreement with them? So everything is fresh and legally correct. I am guessing this would be difficult though as they are the seller's tenants until completion day?
                      That wouldn't help really.
                      You can't start a tenancy until you are in a position to let the property, which isn't until completion.
                      But at the point of completion you automatically become the landlord, so that any tenancy you then agree will be a follow up tenancy to the sellers tenancy (same landlord, same tenant, same property).
                      It might be helpful because it can have the right addresses in etc, but it can't ever be a new start.

                      Based on the dates of the tenancy, some of my concerns may be allayed, there was less that had to be done in 2010 (if that's when this tenancy began) than needs to be done now.

                      Normally a property with a tenant attracts a discount, because of the transfer issues (landlords are usually attractive purchasers, no chain and often cash buyers).

                      Also note that to provide vacant possession, the landlord would have to evict the tenant - who, if the tenant declines to cooperate can take several months to sort out.

                      None of this is insurmountable and good tenants are valuable things (if you obtain vacant possession, you're going to have to hope your next tenants are as good as these seem, wheras retaining the tenants pretty much guarantees it).
                      It's just more to think about.
                      When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
                      Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

                      Comment


                        #12
                        Hi MdeB.

                        Thank you very much. That's really helpful. Thanks again.

                        Comment


                          #13
                          IMO current LL is looking for Novice LL to take on the Ts after completion.
                          Demand vacant possession on completion or walk away.

                          Comment


                            #14
                            Go and meet the tenants and assess them and the state of the property from within. Ask to see their AST as a point of reference.

                            I have bought with tenants in and it was OK. Meeting tenants face to face can tell you a lot about the situation good or bad.



                            Freedom at the point of zero............

                            Comment


                              #15
                              Hi Interlaken,

                              Thanks for your reply. I have met the tenants on two occasions and really like them. They are looking after the property and I have a good feeling about them. Unfortunately, I can't say the same about the agent. Can I ask, are/were you an experienced landlord when you bought a property with tenants in?

                              Comment

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