TIPS ON HOW TO SELL YOUR HOUSE WITH TENANTS STILL IN IT

Rented houses are usually considered a good investment for landlords, because they are expected to receive payments monthly or annually. However, there are reasons a landlord might want to sell their property while tenants still reside in them – whether financial or personal. Whatever the case, the process needn’t be difficult.

Selling your property doesn’t mean you should be disrespectful to your tenants or disregard your legal responsibilities as a landlord. Besides, your tenants have rights and it’s advisable to have them on your side if you want to make any sale hassle-free.

You may want to sell your house as a vacant property (which is easier) or sell to another landlord who understands some of the procedures. When you’re ready to list on the real estate market, here are some tips on how to sell your house with tenants still in it.

Eviction Rights as a Landlord

You can’t wake up one morning and serve your tenants an eviction notice to leave, just because you suddenly want to sell off your house. The Assured Short Hold Tenancy Agreement (ASHT) is a written agreement that is valid for a fixed term (this could be for six months to a year), binding the tenant and the landlord. Therefore, the tenant has the rights to stay in the house until the expiration of the contract. This means they can’t be thrown out regardless of any handover of the property.

There are some open-ended agreements with no specific period of time. If that’s the case, check for any ‘break clause’ that allows you terminate your contract with the tenant whenever necessary. If there isn’t one, it’s best you consult a real estate attorney before issuing any eviction notice.

Tenants can make your sale – or even advertisement for sale – extremely difficult, by not cooperating whenever you want to take potential buyers around the property. The right to ‘quiet enjoyment’ of the house by the tenant also means you have limited access within the building except when they approve. If you forcefully gain entry, you could be accused of harassment or invading the tenants privacy.

Under normal circumstances, a tenant is meant to leave the premises of your building when the ASHT expires, but it’s wise you still give them a two months quit notice in order to protect your rights. In a situation where a tenant might not want to vacate the building (for reasons known to them), you would be forced to take legal action to make them leave. It could be drawn out and you’ll no doubt end up spending money to obtain an eviction order from the court.

Rights to Show Potential Buyers around the Property

 

Everyone loves to take a look at what they’re buying – be it a shoe, a dress, a pet or a car. If you were to make excuses as to why you couldn’t show them, they would lose interest in what you’re offering. This also applies to property. That’s why it’s always good to check your agreement to see if there’s a clause that allows you access to the building, regardless of the reason. If your rights are limited in that area as a landlord, then buyers are unlikely to go into any real estate business transactions with you. However, if your agreement has such a clause, you will need to notify the tenant a day or two prior to the date you wish to visit with a buyer. This shows respect for tenants’ rights and they should easily comply.

However, the tenant can refuse you entry if there’s no such clause – or might do so if you aren’t on good terms. That’s why it’s always best to foster a good relationship with your tenants, even before you start planning on selling the property. Rent reduction for a month or two, some flowers or even a couple of beers can be gestures that go a long way in persuading them to let you show potential buyers the property, while they are still in it.

Creating and nurturing a good relationship with your tenants cannot be over-emphasised. You need them on your side if you really want to sell your house quickly. There are no automatic landlord rights to enter and view a house with a buyer, without approval from the tenant. Although it is not really any business of the tenant’s should you want to sell the property, they may well feel impinged upon and could easily give you a hard time.

Who Buys a House with Tenants Still in it?

When you want to sell your property, there are two types of buyers you will come across: a potential buyer who doesn’t want to be a landlord over tenants, but just needs to own the property for other personal reasons – and a new or existing landlord who actually wants to buy a house with tenants,
so they won’t have to start advertising the house for rent.

When a buyer is not interested in being a landlord, they will want to own a vacant property when the transaction is over. Investors and building developers fall into this category. However, if you cannot agree for your tenants to make the property vacant before the new owner takes over, this could lead to legal problems for the buyer. This is because any agreement you had with your tenants before the sale, automatically becomes their responsibility thereafter. They cannot just cancel and evict the existing tenant, as being a new owner doesn’t give them any special rights to do so. That’s why if you’re dealing with this type of buyer, respect their demand and offer a vacant property at the end of the hand-over.

On the other hand, selling to a new or existing landlord is actually ideal for most landlords of houses with tenants still in. This is because the buyer is paying to ‘continue where you stopped’. They need the rent as a source of revenue, so won’t mind having people still living in the property. In fact, it’s a win-win situation, as they already have tenants in situ, so there is no need scouting for new ones.

Although they don’t have the right to cancel the agreement you had with the tenants before the handover, they can still collect rent and re-negotiate the terms of the contract later on, after the existing contract has expired – or even give the tenants a quit notice if they wish.

However, there’s a category of buyers many landlords hardly consider when looking to sell their house: tenants who want to either own their own property or become landlords, but cannot afford the total asking price. If you can come to an agreement with the tenant, you can offer them the property – but there must be concrete arrangements made with some investors, a property association, a mortgage company or even a bank, to ensure that the tenant pays off all the money in due time. You will need to be comfortable with the decision before even considering it, lest you become embroiled in endless legal battles further down the line.

As the population of most developed and developing countries continues to rise, the demand for accommodation is also on the increase. Therefore, a lot of local government authorities, property associations and private investors are acquiring more properties to meet the needs of the populace. Many of them are willing to buy your house as quickly as possible if you’re ready to sell, but their asking price might be below the market value of the property. If your tenants are proving difficult to handle, this might be a good option for you to consider, but if you wish to make huge profit, you may want to wait out your options.

There are also some private investors who can still offer you good cash for your house after one essential visit. You will not have to inconvenience the tenant – just get one permit from them and you can close the deal within a couple of days.

After taking on board these tips, you will see that there are several options and factors to consider when trying to sell a house with tenants in situ. All in all, the first thing you need to do is either get an approval from the tenant or check for a clause in your ‘tenant and landlord agreement’ that allows you to gain entry to the building, regardless of the reason. As stated earlier, you always need to have the tenant on your side if you want to avoid a non-cooperative tenant hindering your sale. Do not disregard your tenants’ rights or your legal responsibilities as a landlord.

Finally, always remember that your property is an investment and you will want to make good profit from its sale. Keep your tenants on good terms and get a buyer who’s willing to pay you the full market price (or even more). 

Published on 31st October 2017

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