Legal aspects of buying and managing a property with sitting tenants – Checking the tenants before purchase

Legal aspects of buying and managing a property with sitting tenants – Checking the tenants before purchase
By landlord and tenant lawyer Tessa Shepperson of Landlord Law

If you buy an investment property with sitting tenants there is one extra thing you need to check, which you don’t if you are buying a property with vacant possession.  You need to check out the tenants.Bear in mind that when buying property there is no consumer type legal safety net to help you if you find you have bought something unsuitable.  If you don’t find something out before you buy – tough!  You are stuck with it.  And if you don’t ask the right questions, your vendor is under no obligation to tell you anything.

So you need to protect your position.

First of all you need to get a list of all the tenants.  Then for every tenant you need to get:

  • The date that they FIRST moved into the property
  • A copy of their current tenancy agreement and (if they have had more than one) a copy of earlier tenancy agreements, in particular the very first one
  • If the tenant moved in between 15 January 1989 and 28 February 1997 you will need a copy of the section 20 notice and proof that this was served before the first tenancy agreement was signed.
It is particularly important that you get this information if you think you may want to evict the tenants.  For example if you are considering redeveloping the building.  Bear in mind that it will be very difficult if not impossible to evict any tenant who
  • Moved in before 15 January 1989 – as he will have a protected tenancy under the Rent Act 1977, or
  • Who moved in between 15 January 1989 and 28 February 1989 where you cannot prove service of a section 20 notice before the tenancy started.  You will also need to be able to show that the tenancy was for a fixed term of 6 months or more (so you will need a copy of the tenancy).  If you can’t prove either of these then the tenancy will effectively be an assured rather than an assured shorthold tenancy.
In both of these situations the tenant will have long term security of tenure and you will only be able to evict the tenant if :
  • He falls into arrears of rent.  Serious arrears of rent. Or
  • You are able to provide suitable alternative accommodation, or
  • You are able to buy him out
Bearing in mind that if your tenant knows you need vacant possession urgently he may only agree to be bought out at a high price.  If at all.  Sometimes tenants will refuse to move at any price if they are happy where they are.
You also need to check whether the landlord took a deposit and if so whether or not it was protected – and get proof of this.  If the landlord holds the deposit money – make sure it is passed over to you!  If it is held by a custodial scheme – make sure they are notified of the change of landlord.

If the deposit was not protected property then you will be in difficulties if you ever want to evict the tenants.  So be careful about this.

My advice to purchasers is that ideally they should get the vendor to verify all documents and information provided in a statutory declaration which can, if necessary, be used at court.  Otherwise you may find it difficult to prove your case, if you ever need to issue procession proceedings.

Finally, be particularly wary of properties with an unusually low price.  This is usually because they contain difficult Rent Act protected tenants who cannot be evicted.

Tessa Shepperson

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