Empty or tenanted
Over the last few years it seems that there has been a concerted effort by the government to penalise private landlords. These have included changes in taxes being paid, additional tenants rights, minimum EPC and habitation requirements and stamp duty alterations. Some of these have been necessary in my opinion but the vast majority seem to be clobbering the small landlord who owns one or two properties to try to top up their retirement fund or help out children when they eventually want to get on to the housing ladder.
Inevitably this has led to a number of landlords wanting to get out of the market and sell up. But even this can not be as straightforward as you would think.
If you are a landlord with a tenant in a fixed term contract then you cannot sell the property with vacant possession, obviously. This would mean that you could only sell the property with a sitting tenant to another landlord wanting a buy to let property. As I have stated above there are lots of reasons not to get in to this market now and investor purchasers are few a far between. Those that are purchasing obviously have a great deal of choice in what they buy so can afford to be picky but most importantly this type of purchase is predominantly a business transaction. It doesn’t matter that the property is painted nicely or the garden is full of beautiful roses it all boils down to the numbers. If the property is cheap and the expected rental yield is high then the investor will buy. If not they will move on to the next one and find one that is, theres plenty out there.
So unless you are prepared to sell for considerably under the market value for your property the only real alternative is to sell to a potential owner occupier and this will mean it will have to be vacant possession on completion or before.
As I have said if your current tenant is in a fixed term contract you will have to wait until 2 months before this is due to expire before giving notice and then your tenants (hopefully) moving out. If you have a rolling periodic tenancy then you can do this at any time and should get possession back sooner.
Unfortunately if your tenant cant find alternative accommodation then it may be that they don’t move out. You could be understanding and allow them to stay a bit longer or you could start the eviction process which would probably take at least 2 or 3 months and could cost you a few thousand pounds if it goes all the way to eviction.
Once the tenant has left then this is the best scenario for the sales agent. You can then visit the property to ensure it is presented properly, do any works that may be required and get the property on the market. The selling agent can have keys and access the property when he or she needs and hopefully get you a buyer nice a quickly.
Here lies the problem though. Your tenant has moved out and you want to do some work like change some carpets and redecorate. By the time you have completed this work the property has been empty for a month. The property then is marketed and the selling agent has plenty of viewings and you are lucky (in the current market) to agree a sale within a month. This is another month of the property being empty. You then start the sales transaction and the conveyancing starts. Mortgage surveys take place searches are applied for and in the case of leasehold properties freeholders are contacted. Believe it or not the average AVERAGE sales transaction takes 10 – 12 weeks! This is another 3 months empty!
Before you know it your rental property has been empty for half a year. You have had to pay to maintain it, pay the council tax and possibly the service charges and ground rent if it is a leasehold property! That is all before you take in to consideration the loss of rental income. It could run in to thousands of pounds.
Believe it or not though this is the best alternative!
As a selling agent it would always be my recommendation to market an ex rental property with vacant possession. As a landlord myself though I can fully understand the problems with this and the huge financial implications. It makes me wonder if there is an alternative?
The ideal scenario for the landlord would be that the tenants stays in the property paying rent right up until the day that the purchase completes. Trying to coordinate this though is very difficult.
There is no obligation for a tenant to allow access to a property for sales viewings until they have been given 2 months notice to vacate. So they don’t have to let anyone in if they don’t want to. So you give them notice so that you can gain access and quite understandably the tenant goes to look for an alternative property to rent. They find something quickly and are able to move out sooner, you as the landlord don’t want to stand in their way and let them leave a bit early and the property is empty and you have all the issues I have previously stated.
Ideally your tenants are onboard with you selling the property. They allow access whenever we wish and the property is presented really well and Ok for us to market. Unfortunately in my experience this is rare. The problem is there is very little incentive for the tenant to help out. They may not want to move out and therefore they may actually try and scupper you selling the property. I have seen it before where properties are deliberately left in poor condition or presented badly to try and put off potential purchases or gardens are left to go to a jungle or tenants are so difficult when trying to make appointments that access is virtually impossible.
I have had all sorts of situations like this. I have accessed properties on pre arranged appointments only to find tenants still in bed. I have had wild dogs in properties when trying to show people round or have had kitchen sinks overflowing with days worth of washing up not being done. Just this week I turned up at a property for a pre arranged appointment with a tenant in residence only to get the door slammed in my face as he refused to let us in.
As you can see there is no easy route to take. You can serve notice and wait until the property is vacant to try and sell and take the financial implications of that or you can try and keep your tenant and keep him or her onboard with access and presentation of the property (you could incentivise them slightly with a rent reduction to ensure this).
Both routes could have their issues but there is very little alternative I’m afraid.
Next week I will try and find something a bit more positive to talk about, I promise. May be the weather?