A sitting tenant can compromise the price a vendor can expect to achieve for selling the property. In cases where the sitting tenant has a protected tenancy agreement, this can reduce the selling price by a typical amount of about 25%.
Sitting tenants of this type, along with the spouse and the offspring, has the right to remain in the property for life. Given that life expectancy is increasing every year, this could be for a very long time indeed. Such a property is unlikely to generate an income consummate with its underlying value. This is because the rent that a sitting tenant pays is determined by a rent officer. It is certain that this will be considerably less than what might be considered to be a fair commercial rent. All rent increases are controlled by government legislation, and only small increases are permitted.
Given that the landlord is responsible for the upkeep of the property including complying with the annual service and health and safety inspections along with building insurance and management fees, in many instances the low rent means that very little, if any, profit is made. Sometimes the situation is in negative profit. In the past capital growth has served to counter the low levels of income, however with today’s declining property values it is no longer the case. It is not surprising that many landlords are seeking to exit the market.
Even if tenants have Assured Shorthold Tenancies, the way is not always clear. It is very difficult to sell property without vacant possession and even after a shorthold agreement has lapsed it is necessary to give two months notice to leave. Even given this, tenants can be difficult if they do not wish to leave. If they are receiving housing benefit, then it might be necessary to get a court order, which is both expensive and long winded.
In these circumstances it is often better to sell the property with the tenancy agreement to another landlord. Again there are a number of organisations who would be willing to purchase a property under these circumstances, though again it would be at a discounted price.
Tags: Sitting tenants