Buying a house with tenants in situ

Looking to buy a house which already has tenants living in it? Find out what you need to know about your rights and getting a mortgage.

Abbie Laughton-Coles
Abbie Laughton-Coles
Updated 30 March 2022  | 3 mins read

You've found the house of your dreams and everything is looking perfect, apart from one thing: there are already tenants in it.

Depending on how you intend to use the property, this could be a blessing or a curse, especially if you need a mortgage.

If you're looking to move into the house, it could throw a real spanner in the works, but if you're looking for a buy-to-let it can be a relief to know that you'll have paying tenants from the day you complete.

It's possible for a landlord to sell a property with tenants living in it, but there'll be a number of things the buyer needs to look out for which differ to purchasing a residential property.

Key points

  • If you continue to let the property to the tenants you'll need a buy-to-let mortgage
  • If you intend to live in the house yourself, you'll need the owner to sell with full vacant possession
  • If you keep the tenants, you need to make sure the sale is administrated properly for a smooth handover form the previous landlord, to you

Mortgages for houses with tenants in situ

The mortgage you need will depend on what you intend to do with the house.

If you want to keep the tenants on, you'll require a buy-to-let mortgage, but if you intend to ask the current owner to evict the tenants so you can live there yourself, you'll need a residential mortgage.

It's important to find out from the outset if the current owner is willing to evict the tenants and sell to you with full vacant possession, or if it's to be sold as an investment with tenants in situ.

Buying with full vacant possession

If you're buying the house to live in yourself, you'll need the current owner to agree to sell with full vacant possession - this means they'll have to give the tenants notice to leave in good time before exchange of contracts can take place.

Note that if the tenants refuse to leave and the eviction goes through the courts, it could seriously delay or even totally derail your purchase.

A lender won't agree to let you have a residential mortgage for the property then evict the tenants yourself after purchase, so if you're buying it for your next home and need a mortgage, persuading the current owner to evict the tenants first is your only option.

Buy to let investments with tenants in situ

If, on the other hand, you're looking for a buy-to-let investment, a property with tenants in place already could be a time and money saver.

Buy-to-let lenders won't generally look unfavourably on this situation, as long as there are proper tenancy agreements in place and these are transferred to you as the new landlord.

Tenant information you'll need

It's vital you let the tenants know that their landlord is changing and discuss any alterations you're looking to make to the property or tenancy agreement.

Before you buy a property, there's essential information on both the tenants and the tenancy that you must know, without which it could get rather complicated.

This includes:

  • Details of the tenants - for example their occupation
  • The tenancy agreement which is currently in place
  • References and possible guarantors
  • Deposit amount and where it's being held
  • Whether the rent payments are up to date and if there have been any missed or late instalments
  • Have any notices been served on the tenant or landlord?
  • Do the furniture and white goods belong to the tenant or landlord? Are they being sold with the property?

If you decide to retain the same letting agent as the previous landlord, you must make sure that both parties have a record of the landlord handover.

It's important to remember that your tenants have the 'right to quiet enjoyment' which means that you can't just turn up at the property whenever you want and ask them questions or inspect the property.

You need to give them notice of at least a day before you wish to enter the house or flat.

When to complete on the house sale

Completing the sale at the right time can help prevent a real hassle and help you get the most money from your property.

Completing on a property the day the rent is due will make it a lot easier in terms of who is entitled to the rent for that month.

It means that it will come fully to you, rather than having to split it between you and the previous landlord, which can make things a little more difficult to organise.

Tenant's deposit

It's incredibly important that you know how much the tenant's deposit is and what scheme it's protected by.

Once this has been identified, your conveyancing solicitor can start making steps towards transferring the tenant's deposit.

If you're not able to find any information on it, contact your solicitor immediately who will be able to advise you on the best route to take.

If the deposit isn't protected, it could be worth using your own money to sort it out and get it into a scheme straight away.

This is because if the deposit isn't protected within 30 days, the tenant can claim for failure to do so. It can also invalidate any section 21 notices that you attempt to serve them.

Refusal to sign the new tenancy agreement

Unfortunately if the tenants refuse to sign the new tenancy agreement you propose, there's not really anything you can do about it.

The previous agreement will be in place until the new one is signed, so if you want to charge more or change terms - for instance forbid pets when they were allowed previously, that won't be enforced.

This can be particularly true if the terms you've lined up are more restrictive than they were previously. Obviously the tenants will be dubious about signing it and may provide some push back.

If this is the case and the property rolls over on a periodic basis, this could be an opportunity to serve a section 21 notice and evict the nuisance tenants - but as mentioned previously, this can be a lengthy process.