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Can A Landlord Sell a House During A Lease?

Estimated reading time 11 minutes

It will come as a surprise to many tenants, but once a fixed-term rental contract has expired, a landlord or owner can put a property on the market, sell it and evict the tenant even if they have done nothing wrong and have not breached any condition of the rental agreement on their home. This is what’s known as a Section 21 or ‘no-fault’ eviction, and is covered in the Housing Act 1988.¹

The notice must be served on a form 6A, Notice Seeking Possession of a Property Let on An Assured Shorthold Tenancy, and must give two months’ notice to quit.

It doesn’t make any difference whether the landlord wishes to sell quickly to cash house buyers, to put it on the market publicly and await offers, or to move back into it himself perhaps to downsize – in fact no reason has to be given. In many cases a new landlord will want to continue letting the property after purchase.

Section 21 is a controversial statute and government reviews have been launched as to whether this and other laws should be abolished in favour of measures which give tenants more protection of their home.

To complicate matters, during the coronavirus pandemic, most renting tenants can’t be evicted from their home, as all court action for eviction is on hold until at least 23rd August 2020. The ban on evictions was due to end in June but has now been extended.

During this time, bailiffs won’t evict a tenant, and landlords can’t get an eviction order.

It is illegal for a landlord to harass a renting tenant to leave, to lock them out, or to make them leave without notice. A landlord can serve notice to leave, but at the moment can’t enforce it.

Can Your Landlord Sell The House You’re Renting?

In normal times, though, Section 21 applies. If you are a new tenant starting out renting on an Assured Shorthold Tenancy (AST) which includes a six-month break clause, your tenancy will be protected for the first six months, but after that the landlord can serve you two months’ notice.

If the contract has no break clause, the landlord can give notice from the end of the tenth month of letting, so reclaiming their property after 12 months in total. The same two months’ notice can be served at any time on tenants who have been in the property for 12 months or longer. Of course, if the landlord has other reasons for eviction, such as non-payment of rent or antisocial behaviour, these could be exceptions to the Section 21 notice rules.

For what it’s worth, charities such as Shelter claim that the Section 21 regulations are the cause of many cases of homelessness, and are campaigning for reviews to the laws, such as the policy suggested by the Institute for Public Policy Research that tenants’ occupation should be protected for three years, so that the property could be sold only with sitting tenants.

Can A House Be Sold With Tenants In Situ?

It is possible to sell or purchase a house with sitting tenants, and in fact there are some hassle-free advantages for landlords in selling and for investors buying a property with tenants in situ.

This change of ownership will not override any condition of the tenancy agreement or the rights of the renting tenant. Benefits of buying a house with sitting tenants to the new owners include not having to search for a reliable tenant, being able to count on receiving rental payments until the end of the tenancy agreement, and knowing the tenant’s complete rental history.

For the tenant in situ, the advantage is that completion of a sale and change of ownership should not affect their tenancy agreement or rental security, so the transition should be hassle-free.

Some letting agents have special platforms for marketing properties with sitting tenants, and finding buyers in the buy-to-rent market who appreciate the advantages of buying properties with sitting tenants in any location and are willing to make a cash offer.

It’s also worth considering that some specialists will make a cash offer on a property on the market in any condition or valuation, any will offer complete repairs and renovation at their expense. If the condition of the property leaves something to be desired, a cash offer an incentive to the landlord to sell, and also offers advantages to the tenant whatever their location.

There are many advantages to buying for cash. One is that there are no interest payments to be made on a loan, so long-term returns are better. Another advantage of buying for cash is that having 100 equity in a rental property offers complete control over its investment value, and enjoyment of the appreciation in its value. A major advantage in buying for cash is of course that it offers more negotiation power in a purchase.

What Are Your Rights If Your Landlord Decides To Sell?

The terms of a lease give the tenant certain legal rights regarding a property, and those rights do not alter with a change of owner whatever the terms of purchase or date of acceptance.

The terms of tenancy are maintained complete through the property sale, and tenants have a right to remain in the property for the entire fixed term period. The landlord or letting agent must comply with these rights at least until the term of tenancy is over.

Among these rights are those of ‘peaceful enjoyment’ of the property, so for instance tenants do not have to let estate agents in to conduct a valuation, or potential buyers into the property for an inspection even when it is up for sale. The landlord can give conduct a personal inspection of the property with 24 hours’ notice, though the tenant can still deny entry except in cases of emergency such as fires or gas leaks.

The landlord is still responsible for repair and maintenance of the property under the Landlord and Tenant Act 1985.³ This includes annual gas safety reviews by registered engineers, and completion of electrical safety checks every five years.

Bear in mind that while the Landlord and Tenant Act 1985 refers to all short leases for residential property and tenancies of a period of less than seven years (in other words, Assured Shorthold Tenancies), and Section 11 of the Landlord and Tenant Act 1985 sets out who is responsible for repairing a property whilst it is being rented, this covers only repairs and maintenance. Under the Landlord and Tenant Act 1985 the landlord is under no obligation to make improvements, or to remedy defects in construction.

In summary, any condition of tenants’ rights remains the same if the landlord decides to sell the property, and whoever is buying, the new landlord or letting agent must:

Continue to secure their tenants’ rights after acceptance of an offer on the property
Check that the property and the tenancy agreement comply with legal requirements for renting in the UK
Transfer the tenancy deposit into a deposit scheme.
Notify the tenant of the property purchase, including the landlord’s name, address and contact details, no later than two months after completion of the sale.

Different conditions may apply to business rentals, where the tenant may be required to keep the premises in good condition, even if they are not in good condition when rented.

Different laws again apply if you own a flat or maisonette on a long lease which reduces in value over time. The law gives the leaseholder (tenant) the right to a lease extension once they have owned it for two years.

The lease extension right normally functions to add 90 years to what is left on the existing lease at a ‘peppercorn rent’, which means no ground rent is paid. A typical example of a lease extension would be that a 70 year lease would be extended to 160 years.

The landlord is entitled to a price for the lease extension, based on a valuation formula set out in the Leasehold Reform Housing and Urban Development Act 1993.²

If the landlord has a holding deposit, it must be refunded in full within:

7 days of signing a tenancy agreement with the tenant (unless the tenant has agreed in writing for the landlord to use their holding deposit towards their rent or deposit)
7 days of choosing to withdraw from the proposed agreement; or
7 days from the deadline for agreement passing without a tenancy agreement having been signed (unless both parties have agreed to extend it).

Can You Stop Your Landlord From Selling Their Property?

Short answer – ‘No’. However, as previously explained, the tenants’ rights are protected, even after acceptance of an offer on the property, and for instance the price of the rent cannot be changed by the new landlord after purchase without respecting the proper procedures.

One minor exception to the rule is covered by the 2015 Retaliatory Evictions and Deregulation Act.⁴ This law prevents a landlord from evicting a tenant via a Section 21 notice if the tenant has either complained about their property in writing to their landlord or letting agent or reported them to the local council, or if an improvement or emergency work notice has been served on the landlord by the council.

Once a complaint has been made, the landlord has by law 14 days to respond, and must set out what and when they intend to do about the problem, and carry out the repairs. If nothing is done, the tenant must report the problem to the local authority. By doing this, they are protected from being evicted in retaliation.

The sort of work covered by this legislation must be “a serious issue that might cause a potential risk of harm to the health or safety of the tenant, or a family member”, such as a water leak or a faulty heating system, so something minor such as a dripping tap or a dead light bulb is not covered.

Though they are under no obligation to do so, the landlord may choose to offer the sitting tenant first refusal on the property before it is offered to other potential buyers. This may offer some hassle-free advantages to both landlord and tenant, as it represents a chain-free transaction in which the parties selling and buying know each other. Being in a property chain can be the most stressful part of a transaction, as if any part of the chain breaks, non-refundable fees such as survey costs and can be lost. Often this isn’t under your control if someone else in the chain pulls out, so it’s an advantage to be able to avoid a chain altogether.

How Much Notice Should Your Landlord Give You When Selling A House?

In order to evict you from a property, the landlord must serve a Section 21 order and give two months’ notice. Note that this doesn’t automatically end the tenancy, but it does mean that if you do not move out of the location at the end of the two months’ notice, the landlord will likely be granted a possession order.

If a section 21 notice has been properly drafted and served, it will usually take about two months to obtain the possession order. If it comes to the stage where bailiffs or sheriffs are called in to physically evict you, this can take another two to 10 weeks. The landlord cannot apply for a bailiff’s order until the leaving date in the possession order has been passed.

So legally, it’s very difficult for a landlord to make a tenant leave a property on short notice, and any attempt to do so without following the correct procedure may amount to a criminal offence under the Protection from Eviction Act 1977.⁵

It’s also worth remembering that while most landlords who seek possession of a property from the tenants will happily forego the price of any legal fees, as their main aim is to get the property back and re-let, there are situations in which they can claim legal fees and costs from tenants. If a letting agent is used, they may charge the tenants various additional costs and legal fees, although the legal fees they can charge are regulated by the Consumer Rights Act 2015.⁶

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