Tenant in Situ

What is a Tenant In Situ?
Buying or Selling a property with a sitting tenant in situ...

If you are thinking of selling a property that you have already rented out, there will be many aspects to consider, such as the timing of the sale, particularly if your property is not being sold with vacant possession. In this blog article, we will take a dive into the obstacles that commonly arise when there are sitting tenants in the property (also known as ‘tenants in situ’) and the landlord wishes to sell at the same time.

What is a Tenant in Situ?

Basically, a tenant in situ (AKA Sitting Tenant) is defined as tenants who are renting a property that their landlord (property owner) has decided to sell. If this happens during the fixed period of a contract, or the tenancy is protected, the sitting tenant keeps the right to continue living in the property once the property has been sold, until the end of the next fixed period. The property would then have to be sold with a sitting tenant (AKA Tenant in Situ).

What Rights Does a Sitting Tenant Have?

  • Assured Shorthold Tenancy – When purchasing a property with a tenant in situ, the new landlord takes on the existing Assured Shorthold Tenancy (AST Contract) of the tenant. Both parties are bound by the terms of the original tenancy agreement. Only after the fixed term of the AST has ended, can the new landlord evict the tenant subject to the current laws and regulations.
  • Regulated Tenancy – If the tenant entered the tenancy before 1989, they will likely benefit from the security of tenure under a Regulated Tenancy. Their rights will entail a legal right to remain at the property in accordance with the Rent Act 1977. If the sitting tenant should be deceased, under rights of succession, the tenancy may then be able to be passed on to another family member. A sitting tenant does not necessarily have the right to buy the property that they are renting, except in some circumstances, where the property belongs to the local authority. However, this doesn’t mean that a landlord cannot offer their tenant first refusal on the property should they decide to sell. A tenant in situ has the right to remain in the property, provided they continue to pay rent on time and keep to the terms and conditions of their agreement. The rent the tenant pays could be below the current market value, and it is their right to remain paying this lower rental sum as they are protected by law for doing so.

What Responsibilities Does a Tenant in Situ Have?

A tenant in situ (sitting tenant) must ensure that they pay their rent when it is due, or they run the risk of invalidating their tenant in situ status. If a tenant in situ owes a landlord three or more month’s rent, then the landlord will be able to apply for an eviction order under the terms of the Rent Act 1977.

The tenant must also comply with the terms and conditions of the original tenancy agreement. This can include clauses such as no pets, no access to certain areas or ensuring that the garden stays maintained. Please note that these clauses are subject to current laws and regulations.

Selling a property with Tenants in Situ?

If a property is advertised for sale with the words ‘tenant(s) in situ’, it means that it ss being sold with a sitting tenant in place. The tenant(s) currently living at the property will most probably want to remain at the property. The purchaser of the property will then become the tenant’s new landlord. It is important to understand the terms of the tenancy agreement that the sitting tenant has before entering into a contract to buy the property. On some occasions the seller may only advertise tenants in situ because they think it is a good selling point for investors, and the tenants are willing to leave the property and find another place. This should be checked and documented before any transactions take place to avoid any assumptions.

Will a Sitting Tenant Affect the Value of the Property?

Properties that are advertised with tenants in situ are often sold for less than those with vacant possession. However, on some occasions where the property is getting a high rental value and/or is located in a high rental yield area, this may be more attractive to investors, and the value of the property may be as high as a vacant property, or perhaps even higher.

Can a Tenant be Removed from a Property Intending to be sold?

When a property is to be sold with a tenant in situ, the landlord is faced with a few options to remove the tenant:

The first and easiest option is to give the tenant first refusal to buy the property. If they accept your offer then the problem is solved.

The second option would be to give notice to the tenant and inform them of your intention to sell the property, but this can only be done if the terms of the tenancy agreement allow you to. This may be possible if the tenancy is an AST, by issuing what is called a Section 21 Notice (subject to current laws). However, this is not an option for regulated tenancies.

And the third option would be to wait until the end of the tenancy agreement before you sell the property.

You could always (as a landlord) ask the tenant if they will leave so that the house can be sold, But this would be under a voluntary agreement and cannot be enforced.

Buying A Property with Tenants in Situ

The law in England & Wales states that the new owner of the property (AKA the new landlord for the tenant) must take over the exact rights and obligations that the previous landlord had in relation to the tenant. You should therefore take this into consideration when deciding to purchase a property with a tenant in situ, and ensure you have a good plan on what you want to do with it afterwards.

The new landlord must contact the tenants to advise them of the change of ownership. The new landlord should also provide updated instructions on how rent should be paid. The tenant also has a responsibility to ensure that they have the details of the new landlord, and ignorance should not be used as an excuse for unpaid rent.

The new landlord must also contact the previous deposit protection scheme to transfer this under the new landlords nominated deposit protection provider.

It is a legal requirement that the new landlord must also inform the tenant if they transfer their deposit between schemes and provide the sitting tenant with full details of this. The new landlord should also confirm with the transferring landlord that the right to rent checks have been carried out, and evidence retained as to whether any follow-up checks should be conducted.

Selling a property with a sitting tenant is not easy, and there are various complications that should be thoroughly considered. It is highly advisable to seek the services of an experienced estate agent and solicitor when considering this type of transaction. At Open House Estate Agents in Cambridgeshire, we understand how property is personal. If you are starting your journey as a landlord, or even far ahead with a property portfolio, we are here to help each step of the way.

We know that you want a service that is professional, knowledgeable, and personalised to suit you. Find details of your local Open House office here to speak to one of our friendly, knowledgeable agents.

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