Donate to Remove ads

Got a credit card? use our Credit Card & Finance Calculators

Thanks to monabri,Dod101,Anonymous,Gersemi,robbelg, for Donating to support the site

Selling a house with tenants, but no contracts

Covering Market, Trends, and Practical (but see LEMON-AID for Building & DIY)
hiriskpaul
Lemon Quarter
Posts: 1451
Joined: November 4th, 2016, 1:04 pm
Has thanked: 36 times
Been thanked: 328 times

Selling a house with tenants, but no contracts

#249537

Postby hiriskpaul » September 5th, 2019, 12:25 pm

As part of winding up my uncle's estate, I have to sell a house (HMO) with 7 tenants. Unfortunately we can only find 2 tenancy agreements. How much grief could this cause? I do believe that all tenants had ASTs when they moved in. My uncle was very careful in that respect at least.

Next question: An estate agent who did the valuation for probate advised that we should market the property and once we receive an acceptable offer, give all the tenants 2 months notice. On his advice, I wrote to all tenants months ago advising that the house had to be sold and this was what was likely to happen. I also freed the tenants of any notice period should they wish to move sooner (none have). Does anyone else have a view on whether this is the best way to proceed with the house disposal (esp. in light of the lack of contracts)?

Also, should I get in touch with a solicitor to serve notice on the tenants, or do it myself? What price would a solicitor likely charge for issuing notices? I have no clue as yet what the correct procedure is for giving notice (I have been told I need to give 2 months notice), but am quite prepared to find out and do it myself if it save's the estate some money. It depends though on the likely cost of getting a solicitor to do it.

flyer61
2 Lemon pips
Posts: 234
Joined: November 11th, 2016, 12:53 pm
Has thanked: 54 times
Been thanked: 53 times

Re: Selling a house with tenants, but no contracts

#249549

Postby flyer61 » September 5th, 2019, 12:50 pm

hiriskpaul

contact Allsops et al. You might be better off sending it to auction.

hiriskpaul
Lemon Quarter
Posts: 1451
Joined: November 4th, 2016, 1:04 pm
Has thanked: 36 times
Been thanked: 328 times

Re: Selling a house with tenants, but no contracts

#249606

Postby hiriskpaul » September 5th, 2019, 2:43 pm

flyer61 wrote:hiriskpaul

contact Allsops et al. You might be better off sending it to auction.

Thanks. Interesting option. My understanding is that this may not lead to the best price?

PinkDalek
Lemon Quarter
Posts: 4212
Joined: November 4th, 2016, 1:12 pm
Has thanked: 985 times
Been thanked: 1126 times

Re: Selling a house with tenants, but no contracts

#249745

Postby PinkDalek » September 5th, 2019, 10:36 pm

I’d cross post at Legal Issues. You never know who might reply.

Lootman
Lemon Half
Posts: 5890
Joined: November 4th, 2016, 3:58 pm
Has thanked: 35 times
Been thanked: 984 times

Re: Selling a house with tenants, but no contracts

#249752

Postby Lootman » September 5th, 2019, 11:20 pm

hiriskpaul wrote:As part of winding up my uncle's estate, I have to sell a house (HMO) with 7 tenants. Unfortunately we can only find 2 tenancy agreements. How much grief could this cause? I do believe that all tenants had ASTs when they moved in. My uncle was very careful in that respect at least.

A lot of grief, potentially. A lease typically restricts how tenants can use a property. Without a written contract there is nothing to prohibit the tenants doing things that the owner might not want, such as get a variety of pets, smoke, have unlimited guests staying overnight, add flatmates, sublet or assign the tenancy, and so on.

Back in my landlord days I would not have bought a property that had tenants with oral or implied contracts.

hiriskpaul wrote:Next question: An estate agent who did the valuation for probate advised that we should market the property and once we receive an acceptable offer, give all the tenants 2 months notice. On his advice, I wrote to all tenants months ago advising that the house had to be sold and this was what was likely to happen. I also freed the tenants of any notice period should they wish to move sooner (none have). Does anyone else have a view on whether this is the best way to proceed with the house disposal (esp. in light of the lack of contracts)?

My view on this depends on whether you intend to sell this property to a landlord or an owner-occupier. If the latter then it is far better to get rid of the tenants before you market it, as new owners typically want vacant possession. If you are selling with vacant possession and there are tenants there, then they may just refuse to go, thereby delaying the exchange of contracts. Get rid of them before you offer it for sale.

In fact even if the new owner wishes to rent it out, they might want to choose their own tenants rather than inherit them. That said, a landlord might also be happy with existing tenants as it ensures they have cashflow from day one. So it all depends on how you are marketing it.

hiriskpaul wrote:Also, should I get in touch with a solicitor to serve notice on the tenants, or do it myself? What price would a solicitor likely charge for issuing notices? I have no clue as yet what the correct procedure is for giving notice (I have been told I need to give 2 months notice), but am quite prepared to find out and do it myself if it save's the estate some money. It depends though on the likely cost of getting a solicitor to do it.

I don't know what a solicitor costs as I always did my own notices to quit. I did it very informally and, in a situation like this, would simply advise that I am selling the property and they should leave by the end of whatever month is 2 months away. End of month is easier since that is when most vacancies occur.

But I hear that these days tenants are more aggressive about asserting their "rights" and sometimes resist such notices. Then you're going to want to have a professional handling it. It is sad if that has become necessary.

hiriskpaul
Lemon Quarter
Posts: 1451
Joined: November 4th, 2016, 1:04 pm
Has thanked: 36 times
Been thanked: 328 times

Re: Selling a house with tenants, but no contracts

#249824

Postby hiriskpaul » September 6th, 2019, 10:58 am

Lootman wrote:
hiriskpaul wrote:As part of winding up my uncle's estate, I have to sell a house (HMO) with 7 tenants. Unfortunately we can only find 2 tenancy agreements. How much grief could this cause? I do believe that all tenants had ASTs when they moved in. My uncle was very careful in that respect at least.

A lot of grief, potentially. A lease typically restricts how tenants can use a property. Without a written contract there is nothing to prohibit the tenants doing things that the owner might not want, such as get a variety of pets, smoke, have unlimited guests staying overnight, add flatmates, sublet or assign the tenancy, and so on.

Back in my landlord days I would not have bought a property that had tenants with oral or implied contracts.

hiriskpaul wrote:Next question: An estate agent who did the valuation for probate advised that we should market the property and once we receive an acceptable offer, give all the tenants 2 months notice. On his advice, I wrote to all tenants months ago advising that the house had to be sold and this was what was likely to happen. I also freed the tenants of any notice period should they wish to move sooner (none have). Does anyone else have a view on whether this is the best way to proceed with the house disposal (esp. in light of the lack of contracts)?

My view on this depends on whether you intend to sell this property to a landlord or an owner-occupier. If the latter then it is far better to get rid of the tenants before you market it, as new owners typically want vacant possession. If you are selling with vacant possession and there are tenants there, then they may just refuse to go, thereby delaying the exchange of contracts. Get rid of them before you offer it for sale.

In fact even if the new owner wishes to rent it out, they might want to choose their own tenants rather than inherit them. That said, a landlord might also be happy with existing tenants as it ensures they have cashflow from day one. So it all depends on how you are marketing it.

hiriskpaul wrote:Also, should I get in touch with a solicitor to serve notice on the tenants, or do it myself? What price would a solicitor likely charge for issuing notices? I have no clue as yet what the correct procedure is for giving notice (I have been told I need to give 2 months notice), but am quite prepared to find out and do it myself if it save's the estate some money. It depends though on the likely cost of getting a solicitor to do it.

I don't know what a solicitor costs as I always did my own notices to quit. I did it very informally and, in a situation like this, would simply advise that I am selling the property and they should leave by the end of whatever month is 2 months away. End of month is easier since that is when most vacancies occur.

But I hear that these days tenants are more aggressive about asserting their "rights" and sometimes resist such notices. Then you're going to want to have a professional handling it. It is sad if that has become necessary.

Thanks, you have confirmed my own opinion that this is not a great situation to be in. As an executor I am obliged to sell the property for the best price I can, but haven't a clue as to whether it would best be marketed with tenants in or not. I would not have thought the property would be of much interest to an owner occupier. It is a fairly large Georgian house, spread over 4 floors, on a busy road and adjoins a similar HMO (the owner of which is not interested in a purchase - tried that!). The condition is not great and really only just meets the standards required by the council and fire regulations. I think my uncle did as little maintenance as he could get away with. The rent and rental yield is too low according to the estate agent, but probably reflects the generally poor (to my eyes) state of the property. The estate agent said that this would potentially be a good investment but needs a lot of work, properly renovating and converting into flats/studios according to modern building standards.

petronius
Lemon Pip
Posts: 78
Joined: January 15th, 2017, 6:45 pm
Been thanked: 4 times

Re: Selling a house with tenants, but no contracts

#249893

Postby petronius » September 6th, 2019, 1:33 pm

As suggested, it may be better to terminate all the existing tenancies before selling the property empty.

This way, the perspective buyers will not face an uncertain situation and will pay market price for the house. Of course there could be complications in the process (tenants refusing to leave), but these could be dealt with as/if they arise.

You could even consider some incentives (carrot) if the tenants refuse to leave, assuming they have some legal grounds to do so. On the other hand, the stick is legal action (including recovery of any expenses) against them if they have no reasonable case to refuse to go.

This is where an expert in tenancy legislation could be useful.

petronius
Lemon Pip
Posts: 78
Joined: January 15th, 2017, 6:45 pm
Been thanked: 4 times

Re: Selling a house with tenants, but no contracts

#249894

Postby petronius » September 6th, 2019, 1:37 pm

Just wanted to add - do the tenants know you can't find the AST contracts? If they don't, I would not tell them - just act as you have the contracts and serve notice.

hiriskpaul
Lemon Quarter
Posts: 1451
Joined: November 4th, 2016, 1:04 pm
Has thanked: 36 times
Been thanked: 328 times

Re: Selling a house with tenants, but no contracts

#249922

Postby hiriskpaul » September 6th, 2019, 2:40 pm

petronius wrote:Just wanted to add - do the tenants know you can't find the AST contracts? If they don't, I would not tell them - just act as you have the contracts and serve notice.

Thanks and no we have not told them the contracts have been lost!

monabri
Lemon Quarter
Posts: 2935
Joined: January 7th, 2017, 9:56 am
Has thanked: 317 times
Been thanked: 766 times

Re: Selling a house with tenants, but no contracts

#250140

Postby monabri » September 7th, 2019, 3:18 pm

If you have two documents...are they the same template and would it be reasonable to assume that the other 5 would use the same?

Was the AST documentation done through an estate agent? Check the signatures/stamps on the 2 AST documents that you are in possession of. It might be a case that the other 5 documents reside with the EA and you can get copies from them.

Mike4
Lemon Pip
Posts: 60
Joined: November 24th, 2016, 3:29 am
Has thanked: 27 times
Been thanked: 14 times

Re: Selling a house with tenants, but no contracts

#250172

Postby Mike4 » September 7th, 2019, 5:41 pm

hiriskpaul wrote: The condition is not great and really only just meets the standards required by the council and fire regulations. I think my uncle did as little maintenance as he could get away with.


In that case best to sell vacant in my opinion. If only because buyers WILL want to see in all the rooms to understand what they might be buying, and arranging access to all seven occupied rooms at once, many times over for viewings will be a nightmare and anyone buying is likely to want to renovate to current standards anyway. Plus the missing ASTs add more complication, delay and expense.

Any buyer willing to take on a run down property fully tenanted is highly likely to be wanting to pay bottom dollar anyway.

As executor I'd imagine you have a responsibility to get best money for it but on the other hand, you are not required to bend over backwards and invest time and money of your own to maximise the value. Unless you are a beneficiary just sending it to auction as it stands is all you could be reasonably expected to do. Selling at auction is deemed to reveal the true market value.

GoSeigen
Lemon Quarter
Posts: 1662
Joined: November 8th, 2016, 11:14 pm
Has thanked: 386 times
Been thanked: 388 times

Re: Selling a house with tenants, but no contracts

#250247

Postby GoSeigen » September 8th, 2019, 6:07 am

Mike4 wrote:
hiriskpaul wrote: The condition is not great and really only just meets the standards required by the council and fire regulations. I think my uncle did as little maintenance as he could get away with.


In that case best to sell vacant in my opinion. If only because buyers WILL want to see in all the rooms to understand what they might be buying, and arranging access to all seven occupied rooms at once, many times over for viewings will be a nightmare and anyone buying is likely to want to renovate to current standards anyway. Plus the missing ASTs add more complication, delay and expense.

Any buyer willing to take on a run down property fully tenanted is highly likely to be wanting to pay bottom dollar anyway.

As executor I'd imagine you have a responsibility to get best money for it but on the other hand, you are not required to bend over backwards and invest time and money of your own to maximise the value. Unless you are a beneficiary just sending it to auction as it stands is all you could be reasonably expected to do. Selling at auction is deemed to reveal the true market value.


I agree with much of the advice here. Evicting the tenants is going to give the least grief and ensure the best price. You are the best person to do the eviction because there is already a relationship with the tenants, and knowledge of the history.

You can do the eviction yourself but if so, be sure to read extensively, understand the law and do everything required by law before giving notice. This will save heaps of grief later if anyone resists. Then I would issue the notice along with a tempting incentive to leave by the date given. It's far better to get your tenants to leave voluntarily: you should be aware that the notice will be of your intention to seek possession and that having given the notice there are only two ways you will gain possession at its expiration: 1. The tenant leaves voluntarily or 2. You apply to the court to be given possession. So I'd do my utmost to ensure no.1 occurs. If you have made any legal mistakes then route 2 becomes fraught.

The lack of written tenancy does not really compromise your ability to evict. Just assume that the tenants have a Statutory Periodic Tenancy (Assuming they have stayed longer than 6 months) and evict on that basis, and deal with any objections as they arise -- which might be when the tenant has not left at the end of the notice period, which of course is their right. You might like to give slightly more than two months both out of consideration for the tenants and to avoid hiccups involving wrong date, late service of the notice etc.

If this all looks a hassle, it is, and I assure you it looks no less a hassle to potential acquirers! Thus as long as the tenants are there you will struggle to get a good price. Don't let that stop you marketing to people looking for tenants in situ, but I agree with others that without the tenants the potential market is much wider and the process less fraught.

Regards the legal details, I recommend reading the relevant tenancy law, also Tessa Sanderson's web site, and for questions about legal ins and outs the legal board here.

Good luck.


GS
P.S. Just bought a property which had tenants and insisted on vacant possession.

Infrasonic
Lemon Quarter
Posts: 1574
Joined: November 4th, 2016, 2:25 pm
Has thanked: 215 times
Been thanked: 274 times

Re: Selling a house with tenants, but no contracts

#250386

Postby Infrasonic » September 8th, 2019, 8:08 pm

The only thing I'd add is that once having served notice of repossession, maybe have a contingency plan for 'sweeteners' (£££) to help move reluctant tenants on if any want to try and chance their luck with the courts. If they are all paying well below market rent currently some may try and stick it out to the bitter end.
Have a chat with a solicitor also about follow up letter/proceedings costs if needed, so there is potential for clear ramping up from nice to nasty, court action to follow et al, which will look more official coming from a solicitor. You can do all the court stuff yourself, but it's a time/money thing for many with regard to learning all the correct procedures.

I once got bought out of an 'assured tenancy' (an older far more restrictive on a LL tenancy agreement than a modern AST) many years ago, one tenant (out of six flats) stuck it out through the property sale, refurbishment, the lot. The rest of us took the money and moved.

hiriskpaul
Lemon Quarter
Posts: 1451
Joined: November 4th, 2016, 1:04 pm
Has thanked: 36 times
Been thanked: 328 times

Re: Selling a house with tenants, but no contracts

#250541

Postby hiriskpaul » September 9th, 2019, 4:00 pm

Thanks everyone for the comments. It looks like evicting the tenants, so the property is sold vacant, is the appropriate course of action here. All beneficiaries would prefer to wait to achieve the best price rather than go for a quick sale option. At GS's suggestion I will aquaint myself with the correct procedures, but will then probably instruct a solicitor to handle it all.

hiriskpaul
Lemon Quarter
Posts: 1451
Joined: November 4th, 2016, 1:04 pm
Has thanked: 36 times
Been thanked: 328 times

Re: Selling a house with tenants, but no contracts

#250799

Postby hiriskpaul » September 10th, 2019, 4:55 pm

What an over complicated can of worms letting is!

If I have this right, I can serve form 6a to tenants: https://www.gov.uk/guidance/assured-ten ... ms#form-6a for a Section 21 (no fault) notice.

In this case, as I am obtaining probate, am I right in saying that I am the landlord's agent rather than the landlord? The landlord is the estate of the deceased and I am acting as an agent of the estate?

There is no gas supply, but it looks as though EPCs are supposed to be issued with form 6a. However, 6 of the tenants share a bathroom (2 tenants per bathroom), and it looks as though EPCs are not required in this instance. Is this correct? 1 Of the tenants occupies a whole floor, so might be considered to be occupying a flat (not sure though as this floor might also be accessible to other tenants). If this was the case an EPC would be required, but as the tenant has been in the flat since 2007, am I right in saying an EPC is not required here either?

It looks as though tenants should be given the latest version of the how to rent leaflet: https://assets.publishing.service.gov.u ... ent_v4.pdf

Is this right?

GoSeigen
Lemon Quarter
Posts: 1662
Joined: November 8th, 2016, 11:14 pm
Has thanked: 386 times
Been thanked: 388 times

Re: Selling a house with tenants, but no contracts

#251929

Postby GoSeigen » September 15th, 2019, 7:31 am

hiriskpaul wrote:What an over complicated can of worms letting is!

If I have this right, I can serve form 6a to tenants: https://www.gov.uk/guidance/assured-ten ... ms#form-6a for a Section 21 (no fault) notice.

In this case, as I am obtaining probate, am I right in saying that I am the landlord's agent rather than the landlord? The landlord is the estate of the deceased and I am acting as an agent of the estate?

There is no gas supply, but it looks as though EPCs are supposed to be issued with form 6a. However, 6 of the tenants share a bathroom (2 tenants per bathroom), and it looks as though EPCs are not required in this instance. Is this correct? 1 Of the tenants occupies a whole floor, so might be considered to be occupying a flat (not sure though as this floor might also be accessible to other tenants). If this was the case an EPC would be required, but as the tenant has been in the flat since 2007, am I right in saying an EPC is not required here either?

It looks as though tenants should be given the latest version of the how to rent leaflet: https://assets.publishing.service.gov.u ... ent_v4.pdf

Is this right?


Paul, looks like you are getting to grips with the legalities here. Form 6a is correct, your reading of the situation regarding being an agent looks correct to me.

Personally I would not gamble with the EPC. Just get one done and give it to all the tenants in advance of giving notice. It's a small price to pay for avoiding a battle over a technicality. You will surely also need one for selling the property? Also definitely give them the How to Rent leaflet in advance of the notice and get a receipt for both, or serve by snail mail keeping proof of posting (If you are sure you know the correct service addresses).

When you serve the tenants with the EPC and leaflet you could also give them an informal heads up that the landlord has died and that you intend to serve formal notice in due course. That will give them a few more days to get their heads around it and you may be able to gauge from the responses if there are likely to be any trouble-makers!

GS

Lanark
2 Lemon pips
Posts: 232
Joined: March 27th, 2017, 11:41 am
Has thanked: 8 times
Been thanked: 52 times

Re: Selling a house with tenants, but no contracts

#251963

Postby Lanark » September 15th, 2019, 10:52 am

One extra data point here is that once the tenants leave you will likely have several months with no rent income and the place still not sold.

If you serve 2 months notice now you will be marketing the place in early Dec - the worst time to sell. If it was me I think I'd wait until after xmas and market the property in early March.

Infrasonic
Lemon Quarter
Posts: 1574
Joined: November 4th, 2016, 2:25 pm
Has thanked: 215 times
Been thanked: 274 times

Re: Selling a house with tenants, but no contracts

#251984

Postby Infrasonic » September 15th, 2019, 12:26 pm

Has the property got a valid EICR certificate?

https://www.rla.org.uk/landlord/guides/ ... ions.shtml
If your property is a house in multiple occupation (HMO) then it is a legal requirement to have an electrical safety inspection performed at intervals of no more than 5 years. This check must be performed by a competent person.


Even though it isn't yet a legal requirement (but will be soon apparently) I got an inspection and PAT done by my electrician on my three bed semi rental, cost about £150 six years ago.

GoSeigen
Lemon Quarter
Posts: 1662
Joined: November 8th, 2016, 11:14 pm
Has thanked: 386 times
Been thanked: 388 times

Re: Selling a house with tenants, but no contracts

#252048

Postby GoSeigen » September 15th, 2019, 6:55 pm

Infrasonic wrote:Has the property got a valid EICR certificate?

https://www.rla.org.uk/landlord/guides/ ... ions.shtml
If your property is a house in multiple occupation (HMO) then it is a legal requirement to have an electrical safety inspection performed at intervals of no more than 5 years. This check must be performed by a competent person.


Even though it isn't yet a legal requirement (but will be soon apparently) I got an inspection and PAT done by my electrician on my three bed semi rental, cost about £150 six years ago.


But the crucial point is whether its absence is an impediment to gaining possession under Section 21. I'm not aware that it is but may be wrong.

The risk of prosecution is a different question and no doubt Infrasonic is correct here.


GS

Infrasonic
Lemon Quarter
Posts: 1574
Joined: November 4th, 2016, 2:25 pm
Has thanked: 215 times
Been thanked: 274 times

Re: Selling a house with tenants, but no contracts

#252058

Postby Infrasonic » September 15th, 2019, 7:39 pm

GoSeigen wrote:
Infrasonic wrote:Has the property got a valid EICR certificate?

https://www.rla.org.uk/landlord/guides/ ... ions.shtml
If your property is a house in multiple occupation (HMO) then it is a legal requirement to have an electrical safety inspection performed at intervals of no more than 5 years. This check must be performed by a competent person.


Even though it isn't yet a legal requirement (but will be soon apparently) I got an inspection and PAT done by my electrician on my three bed semi rental, cost about £150 six years ago.


But the crucial point is whether its absence is an impediment to gaining possession under Section 21. I'm not aware that it is but may be wrong.

The risk of prosecution is a different question and no doubt Infrasonic is correct here.


GS


I've never owned an HMO but from the link upthread...
Dangerous electrics can contribute to a serious risk of fire, extreme cold, and insufficient lighting. As such, landlords who do not check the property may face enforcement action such as an improvement notice under the Housing Health and Safety Rating System, endangering their section 21 notices.


Having attended property auctions around 2009 with plenty of builders/professional LL's in attendance, I particularly noticed the HMO's received zero bidding, I presume because they required substantial upgrading to comply with current regs?
I don't know for sure as it's not something I ever got into, just offering a warning to the OP.


Return to “Property Investment Discussions”

Who is online

Users browsing this forum: Hariseldon58 and 1 guest