Buying a Property With Tenants in Situ

Whether you’re a seasoned investor or a first-time buyer, you might be considering buying a property with a tenant in situ. Selling a property with a tenant in situ is not that unusual and can actually be a strategic move for investors. However, there are plenty of things that you should consider before making this decision. 

As experts in the property market with over 15 years of experience, in this guide, we will explore the key factors that you should consider when buying a house with a tenant in situ and provide insights to help you make a strategic and informed decision. At Jon Simon, we have a multitude of quality properties for sale and to let across Bacup, Burnley, Radcliffe, and Ramsbottom. 

Let’s tell you about tenants in situ in a bit more detail… 

What does tenant in situ mean? 

A tenant in situ is a term that is used to describe a property that is already occupied by a tenant at the time of the sale. In other words, the tenant is ‘in place’ or ‘in situ’ when the property changes hands. It means that the new owner of the property becomes the landlord for the existing tenant and they must honour the terms of the existing tenancy agreement. This includes the rent amount, tenancy length, and any other conditions outlined in the agreement. 

Some landlords or those wanting to become a landlord may take the decision to sell with a tenant in situ because they don’t want to evict the tenant or they have a good relationship with the tenant. If your tenant is renting through a fixed-term tenancy agreement, they are within their rights to remain in situ until the current agreement’s expiration. Sometimes it can be harder to sell with tenants in situ, especially if there is a mortgage involved. 

What happens when you buy a house that has tenants in situ? 

Purchasing a property with tenants in situ means that the tenants will continue to live in the property under the terms of their existing tenancy agreement. As the new owner, you inherit the responsibilities of the landlord, which include maintenance, rent collection, and adhering to the terms set out in the tenancy agreement. 

It can be an advantage for you as a landlord to buy a house that has somebody in situ as it means that you don’t need to search for one. Plus, it guarantees you a rental income from day one with the same amount paid and the date fixed until the fixed term within the rental agreement has passed. 

Things you should consider as a buyer

Buying a property with a tenant in situ is not as straightforward as buying a property with vacant possession. There are several key things that must be verified before you buy the property with a tenant in situ. These can include:

• Is the property licensed? – Some rental properties must be licensed, specifically HMOs. Not all landlords licence their property as they don’t know that it is necessary, so make sure that you ask for the details of the licence. 
• Are there any restrictions on who you can let the property to? – In some areas, new HMOs might be banned in an area of high-density HMOs. This can prevent you from converting a single-family dwelling into a shared house. 
• Was there a property inventory carried out at the start of the tenancy? – Property inventories can often be forgotten about, but you need to know what’s included in the property before you take over the tenancy. Ask for a property inventory to be carried out if there isn’t one before buying a property with existing tenants. 

Other things, such as ensuring that the property has had a gas safety check, have the correct fire safety measures in place, and how long is left on the current tenancy agreement should also be checked before finalising any decisions. 

When considering buying a property with tenants in situ, it is crucial to weigh up several factors including the advantages and disadvantages. Let’s have a look at these pros and cons in a bit more detail. 

What are the pros of sitting tenants? 

• Properties with a tenant in situ are generally cheaper because they are harder to sell. Tenants can be considered to be a higher risk, therefore the property generally sells for a lower price. This can be especially good for cash buyers.
• It can provide immediate income. If there is already a tenant in place then the rent is paid from the first day you take ownership, which can be an attractive proposition for any landlord. 
• There is no need to look for a tenant. Looking for a tenant can take time which can be saved if there is already one in place. 
• It is unlikely that the property will need any immediate refurbishment. Most properties are refreshed between tenancies, so if you already have a tenant in situ then there is a greater chance that the property is in fair condition. 

What are the cons of sitting tenants? 

• Lenders are reluctant to finance a property with a tenant in situ as they are considered higher risk. You might need to find a specialist lender, so we recommend working with a broker or putting up a higher deposit. 
• Landlords who sell with a tenant in situ usually do this for a fast sale. This could be because there are issues with the property or tenant which could result in unexpected bills when you take ownership. 
• The tenant already in situ might not be a good fit. One of the cons is that you haven’t chosen the tenant yourself so they might not be a good fit for you and your operating model. 
• It can sometimes be difficult and expensive to evict a tenant in situ. Make sure that you check the status of their tenancy agreement before you commit to buying the property. 

Understand tenants in situ and more with JonSimon 

Buying or selling a property with tenants in situ involves understanding the rights and obligations associated with the existing tenancy agreement, which we hope you have become familiar with in this blog. Here at Jon Simon, whether you’re selling your house or are interested in renting, we’re here for you every step of the way, from making an offer to signing the final contract. 

Please contact us for more information – a member of our team will be more than happy to get back to you. Or, request a free online valuation and discover exactly how much your home could be worth today!