Sitting Tenant and What you can do

The term sitting tenant or tenant in situ refers to a tenant in occupation of a premises but it particularly refers to one in residence when a property changes hands.

Renting is on the rise in the UK, both in relative and absolute terms, so this situation is occurring more and more frequently. The situation has various implications for both landlord and tenant and this article addresses these.

Although we mostly cover if you are buying, this article also covers if you are selling a property with sitting tenants:

·        How do people become sitting tenants?

·        What does a landlord do when they want to sell a property which has tenants in it?

·        What happens when you buy a property with a sitting tenant?

·        How do you evict a sitting tenant?

·        What is a protected or regulated tenant?

How do people become sitting tenants?

This occur when a property changes ownership but a tenant/tenants remain in residence because of an existing tenancy agreement.

This situation might also occur, for example, when the previous landlord has tried to but failed to evict an existing tenant or where a tenant has a protected tenancy - this is looked at in more detail below.

What does a landlord do when they want to sell a property which has tenants in it?

A landlord selling a property which has tenants in it has two options if they want to sell one of their properties:

·        Use a Section 21 Notice to evict the tenant/s (NB Only if the relevant tenancies' fixed terms have expired); or

·        Sell the property on with sitting tenant/s in it.

There are 2 clear reasons why a landlord in this situation would opt to sell the property on with sitting tenant/s in it:

·        Eviction may prove difficult: there are no special grounds for eviction just because a landlord wants to sell a property.

·        The existing landlord will want to keep on rental payments - and thus income - up until the point of sale.

What happens when you buy a property with a sitting tenant?

The law in England & Wales states that when you buy a property with a tenant in situ, you take over the rights and obligations that the previous landlord had with regard to the tenant.

You firstly have to contact the tenant/s to advise them of the change of landlord and give them updated instructions as to how to pay the rent.

You must transfer whatever arrangements accompanied the original deposit paid so that they are under your own name. Ideally this should be done at the point of sale and you should bear in mind that this may involve a deposit holding scheme.

You must inform your tenant if you transfer their deposit between schemes and give them full details - this is a legal requirement.

Strictly speaking a tenant can apply for a penalty award if you've failed to protect the deposit within 30 days of taking up ownership - a strong incentive to iron matters like this out during your conveyancing.

Normally as a new landlord you'll want to get your tenants to sign new tenancy agreement, in view of any adjustments such as tenancy length and rent amount.

However, a regulated or protected tenant, who'll have a tenancy which began before January 1989, has greater rights than someone with an Assured Shorthold Tenancy (AST), which are the norm these days, and they may be unwilling to sign a new tenancy: they have greater rights against eviction than people on an AST and benefit, for example, from fair rent guidelines.

These are rights they are unlikely to sign away and if they don't sign a new agreement and their previous agreement is still valid, you are bound by the terms of the previous agreement.

However, if the tenancy is a AST but the tenants don't want to sign a new agreement, you are then entitled to serve a Section 21 Notice to gain possession but only in certain circumstances.

What do you do about their deposit?

You would be advised not to complete on any purchase of a buy to let property until all tenants' deposits have been transferred over to you.

How do you evict a sitting tenant?

There are broadly 2 situations here:

·        Tenant has an AST

·        Tenant is protected or regulated

What if the remaining tenant has an AST?

If your tenant has an existing AST, you can evict them by serving a Section 21 Notice.

You may wish to do this if, for example, you wish to take up residency in the property as your principal home and your existing tenant/s refuse to vacate at a mutually convenient time.

For the Section 21 Notice to be valid:

·        You have to wait until any current fixed term tenancy expires.

·        You should check that the previous owner met the required conditions regarding deposit protection.

If these 2 conditions are not satisfied, your Section 21 Notice may be declared invalid.

Tenant is protected or regulated

If your tenant is protected or regulated, you may find it very difficult to evict them because of the different nature of the legal protections they have.

Click to view the list of possible grounds you might have for evicting a protected tenant They include the tenant allowing the property to be used for moral or illegal purposes, for example.

Certainly, as said, if the tenant is behaving reasonably and paying their required rent regularly, you might have to resort to offering them cash to move out - and there's no legal force on them to accept the cash.

How much might you offer a regulated tenant to move out?

If you do offer cash, it's typical to offer a tenant half the difference between the value of the property subject to a regulated tenancy (75%) and the value of the property with vacant possession so this sum might normally be around 12.5% of market value.

Worried if you are buying a property with protected tenants?

Always investigate if a property you're thinking of buying has protected tenants if you intend to make it your primary residence because you may find it very difficult to evict them. This will form part of the declaration process by the seller to you in their TA6 Property Information Form. Read more about what is included in the Property Information Form.

What is a protected or regulated tenant?

A protected or regulated tenant has a tenancy which began before 15 January 1989 which is regulated under the Rent Act 1977.

Under a regulated tenancy:

·        The landlord cannot evict the tenant unless they get a possession order from the courts, which will only be granted in certain circumstance (see above).

·        The spouse of a regulated tenant can take over the regulated tenancy on the death of that tenant - this is called the right of inheritance. They then also become a regulated tenant. A regulated tenancy can only be inherited twice; on the second inheritance, the person who inherited becomes an assured tenant (NB this is not the same as an assured shorthold tenant, relevant to an AST). Assured tenants have similar rights to regulated tenants but cannot pass the tenancy on again.

·        A family member can also inherit the regulated tenancy if they were living with the deceased regulated tenant for at least 2 years - they become an assured tenant.

·        Both the landlord and the tenant can apply to the rent officer for a fair rent to be registered.

·        Once the landlord has registered a rent, they can't increase it until it is reviewed or cancelled.

·        Even if the landlord hasn't registered a rent, they can only increase it under certain circumstances.

·        The tenant has a right to rent out a room to a lodger unless their tenancy agreement specifically says they must consult their landlord first.