Buying a Property With a Tenant in Situ

Especially in the buy-to-let market, it’s common for a property to be purchased with a tenant in occupation under a tenancy previously created by the seller. 

If you purchase a property with an existing tenancy, the tenancy is assigned to the purchaser, who becomes the new landlord. 

The tenancy continues as it did, and the tenancy terms bind the new landlord. This includes if the tenancy was a verbal tenancy. All the legal protections afforded to the occupying tenant will continue as per the rules.

Name and Address of Landlord

On purchase, the new landlord must notify the tenant no later than the next day on which rent is payable under the tenancy or if that is within two months of the assignment, the end of that period of two months. 

This notice is under section 3 Landlord and Tenant Act 1985:

3 Duty to inform tenant of assignment of landlord’s interest.

(1) If the interest of the landlord under a tenancy of premises which consist of or include a dwelling is assigned, the new landlord shall give notice in writing of the assignment, and of his name and address, to the tenant not later than the next day on which rent is payable under the tenancy or, if that is within two months of the assignment, the end of that period of two months. (2) …

It seems the address provided under section 3 should be the landlord's actual address. 

In addition to the above, under section 48 Landlord and Tenant Act 1987, a landlord must always supply by notice to a tenant an address in England or Wales where notices will be deemed served on the landlord. 

In most cases, the section 3 and 48 will be the same address. We have a suitable form which combines both section 3 and 48 here. See more information about providing a landlord name and address here.

Tenancy Agreement

A common question is whether to do a new tenancy agreement or not. There’s no requirement to do so, especially if the new landlord is happy with the terms of the existing contract. 

The new landlord takes over the tenancy, as mentioned earlier. It will also depend on whether the current tenant is willing to sign a new tenancy agreement. 

There would be no way of forcing a new agreement on an existing tenant. However, many landlords would prefer a new tenancy, especially if they are familiar with the standard terms. If this is your preference and the tenant is happy, this is fine and would be an excellent way to tidy up all the paperwork. 

Another advantage is the name and address as discussed earlier can be dealt with in the new tenancy agreement. 

All the documents will need to supply just like any other tenancy (e.g. how to rent, deposit prescribed information, gas safety, electrical safety, EPC etc.). It shouldn’t be treated as a “renewal” but should instead be treated like a brand new tenancy (which technically it would be because it’s not the same landlord). 

You can download a tenancy agreement from our Tenancy Builder.

Tenancy Deposit

If there’s a deposit with the current landlord, this will need to be checked that it was protected. Depending on where it’s held, it will need unprotecting and then re-protecting under the new landlord. See more information about tenancy deposits.

Inventory

If an inventory were prepared, the new landlord would be bound by the contents and entitled to the property returned as per the inventory (less fair wear and tear).

Rent Arrears

If the tenant is in rent arrears at the time of purchase, who is entitled to the arrears might depend on how the property was purchased. 

A common way is that the purchaser would pay the seller the amount of the arrears on top of the purchase price. That way, if the tenant pays the arrears to the new landlord, the new landlord is entitled to retain the payments. Without this, it could be that the seller is entitled to any arrears that fell due before the purchase.

 It may also be the case that the terms of sale specifically mention what happens with any arrears paid to the new landlord after the sale.

Selling a Property With a Tenant in Situ

We have an article dealing with the situation of purchasing a property subject to an existing tenancy here.