Buying or selling a property with or without a tenant is usually straightforward enough, however, it’s worth using an estate agent and a conveyancer that has experience in this sector to speed things up and avoid potential pitfalls.
In addition, it might actually be in the seller’s interests to gain vacant possession (VP) before completion day as property sold with VP is often considered more valuable than property that is let. A professional agent will be able to advise you on this and potentially save you a lot of money.
There are other things to consider. For example, property that is owned as a buy-to-let is likely to be subject to capital gains tax (or other taxes depending on how the property is owned) upon sale. For Capital Gains Tax (CGT) to be payable, first you need to realise a capital gain. Second, you are allowed to set against that gain an allowance for improvements made during your ownership (not repairs, that is different) and also any indexing related to inflation. You can also set professional costs against any gain and, of course, any unused personal CGT allowance for the year.
If you decide to sell with a sitting tenant then the property is sold subject to that tenancy and the conveyancers will want to see the tenancy agreement, statutory certificates like the annual gas certificate, electricity certificates, etc as well as the usual EPC. They will also have questions relating to the tenancy and you will need to clarify whether the tenant has been or is currently in breach of the tenancy (i.e. unpaid rent, etc). Upon sale of the property you will also need to make sure that the tenant’s deposit is properly dealt with and accounted for.
Most tenancy agreements are likely to allow for you or your agent to view and inspect the property and to erect a for sale board but you will need to come to a reasonable arrangement with respect to initial inspections and viewings. You’ll also need to notify the tenant as and when you sell the property and provide details of the new owner, as well as accounting for rent held on account.
It’s important to make a proper note of all fixtures and fittings, probably even more so in the case of a tenanted property and remember to take meter readings on completion day.
Your buyer will be buying subject to the existing tenant. If the tenant has ‘security of tenure’ then they will be entitled to remain in occupation in accordance with the specific circumstances and the type of tenancy and its terms. The new buyer will be entitled to the rent, etc as you were previously.
Finally, bear in mind that buyers of investment property are now potentially liable to large amounts of SDLT (Stamp Duty Land Tax) and this cost is likely to erode the capital value of your property, making a sale to an owner occupier likely to realise a higher price and therefore be more attractive to the seller.
For detailed advice based on your own personal circumstances contact Duncan Yeardley on 01344 860121 for an initial consultation with no obligation.