Hello everyone,
I have the opportunity to purchase a flat with a sitting tenant…something which is completely new to me.
From what I can tell the property is immaculate, and was built in the last 10 years so should be in pretty good nick structurally.
I’m getting back to the estate agent soon with some questions, I was wondering what things I need to ask…?
Like I said, this is all very new to me and I appreciate any help!
Thank you,
Catherine
You need to do serious due diligence on whether everything was handled properly when the tenancy was set up, otherwise you could be buying an expensive liability. You should start with the assumption that they are not selling with vacant possession because they can’t easily evict the tensnt. Offers should be 10-20% below market value and drop further if you find problems.
Have a look at this useful checklist: 10 questions to ask when buying a tenanted property | Vesta Blog
Thanks for this, I believe that everything will have been set up & managed correctly as the property is currently being let by a reputable lettings management company in the area.
Will definitely be something I look into further, thanks for the link!
Ha ha ha. That’s a good one.
Ask many of the landlords on this and other forums for their experience of the “reputable” agents
Hysterical! That’s why I rent my property out my self with no estate agents involved at all isn’t that one of the radon’s we are all using open rent
Hi Catrina, sorry I don’t seem to follow? What is hysterical?
The property which I am interested in buying is being sold with a local estate & letting agent? I didn’t say I would be using this agency.
Hi Catherine,
Hysterical is referring to the words reputable in the same sentence as estate agent/letting management company. You don’t get may of those.
Catherine1, you should not assume that the agent has not made any mistakes.
I haven’t assumed 
I said that I believe that everything would be set up correctly and I will definitely be looking into it further…
I viewed the property today and the tenant provided me with the inventory schedule, the AST, the deposit protection certificate as well as a screenshot of the bank payments to the current landlord… So looks like I got lucky
Time will tell if everything is okay and you need to do some serious LL awareness training, try National Landlords Association , the membership is tax deductible - you will be paying tax on this property and must declare it by notifying the tax office, completing an annual tax return which you fill in online.
When you sell you will pay capital gains if above the allowances.
If the flat is leasehold you really must check out the ground rent conditions and what services charges are plus any large jobs due above any reserves which you will have to contribute to.
If you are currently employed you would normally not have to complete a tax return unless you had investments over the allowances.
Thanks for this, I had been considering a membership with the NRLA but wasn’t entirely sure what it was as I’ve never had a membership before, I’ll look into getting a membership today.
The service charge is the bit that puts me off the most, the property is leasehold and has 115 years left. The service charges is relatively cheap but I understand they can increase drastically. I suppose it’s about risk…
In terms of the taxes etc, they’re all taken care of by the accountant
I would say look for a place with a much longer leasehold .I buy freehold or with 80 or so years of a 999 year lease gone by so about 920 years left, ,will probably see me out !. Almost as good as freehold
Specifically look at the ground rent conditions as some double every 5 or ten years
I’d hope 920 years would be enough to see you out! haha.
I’ll have a look around for something with a longer lease
usually its older property with a longer lease, if in flats mostly… In my area anyway. Leasehold rules are changing ,we are told so be carefull
that tenant check that David 122 posted in the first reply is very good
I personally would stay clear. You can never get them Out if things go wrong. Speak to neighbours, investigate. But I would never ever buy a flat with a sitting tenant. I live in a property where there’s a sitting tenabt above & he’s been a complete nightmare. Im now in a legal battle for forfeiture on the leaseholder as he has a tenabt with serious anti social behaviour. It could end up the investment from hell.
I bought one with a sitting tenant about 25 years ago . he is still with me and always paid the rent… it can vary greatly in results
The solicitor who is doing the conveyancing for you should also ask to look at the existing tenancy agreement to confirm that it complies with the law and protects you as far as the law allows. In addition, I would want to see bank statements confirming that the tenant is not in arrears and has paid the rent on time each month. I know for instance that in my area, the local authority wants prospective council house tenants to have a good reference and have been minus any arrears for three years in order to qualify for a council house. That is the sort of evidence I would wish to see if buying a house with a sitting tenant!
Personally, I wouldn’t buy a leasehold again. My first purchase was a leasehold flat in South Cumbria and it was a pain in the butt. Not only does the monthly management fee eat into your profits, but there will possibly be times when you are asked to make a one-off contribution as I experienced when the development had new windows fitted and was re-painted externally (amongst other major works). I only bought freehold after that one. I know other landlords have a totally opposite opinion to me and are happy to buy leasehold, so I guess it’s just down to personal preference.
With regards to a sitting tenant, I personally wouldn’t take the risk, but if you do your due diligence and double check everything, hopefully you will end up with a good tenant as was the case with Colin3. Anyway, good luck in whatever decision you make.