How Much Does a Sitting Tenant Devalue a Property?

What is a sitting tenant?

A sitting tenant is a person with a legal right to stay in the property they are renting. They are also known as “tenant in situ”

Are there different types of sitting tenant?

Yes, and this is where the complications arise when selling a property with a sitting tenant and why selling a property with at sitting tenant may devalue your rental property as you may not be able to sell the property vacant depending on the type of contract the tenant has.

What are the different types of contracts?

Assured shorthold tenancy agreements

If you are selling a property with tenants that hold an assured shorthand tenancy the agreement allows you to end the contract by serving a Section 21 or Section 8 Notice.  By following a prescribed legal process and informing your tenants of your intention to sell and serving them with the valid notice period the process should be simple and straight forward which means you can sell your property in a short space of time.

Assured tenancy

These agreements were primarily used by housing associations between 1989-1997 to grant tenants enhanced long-term tenancy rights. If. You are selling a property with a sitting tenant on an assured tenancy it is likely to greatly affect the value of the property as they could give the tenant the right to live in the property until they die.

Non-assured shorthold tenancy

Non-assured shorthold tenancies are used when assured shorthold tenancies cannot be applied. This might be because the tenant already has another main home, the rent is less than £250 per year, or if the landlord lives in the same property as the tenants but they don’t share any facilities. A landlord does not have to provide a Section 21 or Section 8 Notice to end the tenancy. They do have the right to stay in a rental property until the end of the agreed fixed term if they follow the rules and regulations. However,

you can simply insist on the tenant leaving at the end of the fixed term.

Excluded tenancy

An excluded tenant is someone who lives in the property used by the landlord and they share facilities. Whilst the landlord must provide reasonable notice to tenants to vacate the length of the notice corresponds to the length of the rental period.

Regulated tenancy

Your tenant is probably a regulated tenant if they have been paying rent at the property to a private landlord before 15th January 1989. If they later signed a new tenancy agreement after that date with the same landlord, even if it’s at a different address they will still have the same tenancy rights and are known as “protected tenants” or “regulated tenants”. Their rent increases have to be registered as “fair” by a valuation office agency (government organisation) and are at a lower than market rent. A protected tenant has strong rights and if a landlord wants to evict a protected tenant, they can only do so with a granted court possession order.  Another differentiation is that a protected tenant has the right to pass the tenancy on if they die, they can pass it on to their spouse, partner or another family member living with them. Also, most lenders will not lend against a property with a regulated tenant as they want to be able to gain possession should the need arise. So, the value of the property you are selling with a regulated tenant will be greatly affected as a result.

How much does a sitting tenant devalue my property?

There are in fact both positive and negative effects to consider on the effect sitting tenants have on the value of your rental property.

On the positive side, having a sitting tenant means that the property is generating rental income, which can be attractive to potential buyers as it is already showing a steady stream of revenue. If the tenant has been living there for a long time and has a good track record of paying rent on time, it can also provide reassurance to buyers that the income will continue and eliminates the need to search for new tenants. Also, some lenders may view a property with reliable rental income as less risky, potentially offering more favourable financing terms.

On the negative side having a sitting tenant in a property may reduce the number of potential buyers as buyers that prefer vacant properties won’t be interested, limiting demand will obviously have a negative impact on the value of the property as it decreases the overall market appeal which effectively devalues a property with tenants in situ.

If the tenant is regulated/protected and has the right to live in the property until they die or has an extended tenancy it will restrict the landlord’s freedom to sell the property, make changes, raise rents to market rates. These limitations can discourage buyers and make the property less attractive which in turn devalues the property.

Bottom line is that prices for properties a sitting tenant tend to be lower as it limits the option for new landlords who may want to introduce new tenancy agreements, increase rents, or redevelop the property, and it rules out offers from anyone wanting to buy a home for themselves. Studies have shown that in general, selling a property with sitting tenants under a temporary tenancy agreement can devalue the selling price by between 20-25%. For tenants with an assured tenancy and or regulated/protected tenants – and therefore greater rights – this figure can grow to as much as 30-40%.

What are my options for selling a property with a sitting tenant?

Landlords, you have three options when it comes to selling you tenanted property:

1. Sell it through an estate agent
2. Sell it at auction
3. Sell it to a home buying company.

If a landlord sells through an estate agent – ideally one should be sought that has experience in selling tenanted properties – then a fair asking price will likely be set by the agent. They’ll handle the sale and viewings and in most cases, it will take between 3-6 months for a sale to go through. You will have to pay a fee to the estate agent which will be calculated as a % of the asking price and you will also have valuation and solicitors’ fees to deduct from the price you receive.

Auctions can provide quicker sales than an estate agent sometimes within 28 days but as with any auction you run the risk that the property could also sell for less than you might have initially hoped as to make the buy-to-let attractive a low guide may be required. You the landlord will also have to pay entry fees to enter the property into the auction as well as conveyancing fees.

A home buying company like Gaffsy will complete a purchase at speed, guaranteeing you a quick sale. A house buying company does not require funding to make their purchase and whilst they often buy property at a reduced prices landlords won’t have any costs as solicitors’ fees are covered by the home buying company. The price you are offered is the cash you receive for the sale.  Home buying companies like Gaffsy are experienced in buying properties with problem tenants, squatters, tenants in arrears and or legal or structural issues that have scared away private buyers.

Why Gaffsy?

If you’re a landlord looking to sell a property with sitting tenants, Gaffsy, a genuine cash house buyer offers several advantages that make them a great choice:

• No fees: Gaffsy doesn’t charge any fees, saving landlords a significant amount of money during the selling process.
• Genuine cash buyer: Gaffsy has the financial resources to purchase properties, eliminating delays associated with traditional buyers relying on mortgage approvals.

• Transparent selling process: Gaffsy ensures clear communication and updates throughout the selling process, reducing stress for landlords.

• Expertise in tenanted property: Gaffsy specialises in buying properties with tenants in situ, regardless of the tenancy type, making the process smoother.

• Fast property sale: Gaffsy has a track record of facilitating quick house sales, even in situations involving problem tenants or squatters.

Additionally, Gaffsy is a reputable cash house buyer, a member of the NAPB and the Property Ombudsman, with readily available funds and a commitment to transparency. They cover all legal fees, ensuring landlords receive the full cash amount offered for their rental property.

To get a no-obligation cash offer, landlords can contact Gaffsy at 0207 459 4546. Gaffsy can buy any house and buy any flat regardless of its condition, location and size. We can help you sell your flat fast, our team is on hand to make you a free no-obligation cash offer today