Pitfalls of buying an already tenanted property for BTL

silvercar

Looking at a BTL and there is a property for sale which is already tenanted. I'm just thinking on what the problems may be. I have the following thoughts and would be interested in views:

1. Deposit I know the deposit needs to be passed from current landlord (seller) to new landlord (buyer). Presumably this then needs re-protecting and proscribed info and protection details given to tenant.

2. Inventory The price of the property reflects its condition, so when tenant eventually checks out, what is the base point, the condition of the property when bought or the condition when tenant moved in. Is there any way of validating the initial inventory (assuming there was one). If not, it may be just as easy to get seller to return deposit to tenant. How does the new landlord ensure this has been done and isn't held liable for return of a deposit he never saw?

3. Tenant check Obviously the existing landlord would be keen to sell and not reveal any problems with current tenant. Can you check out current tenant as buying the property with tenant, means that you want to know the tenant is reliable for the rent.

dimbo61

Very unlikely now but how long has the tenant lived at the property ? Years ?
Not one of the very old tenancies where you cannot evict the tenant and they have protected rent ?

If you have No Inventory then the tenant could rip the property apart and you cannot prove what the condition was before you bought the place.
Only thinking of worst possible case.

Good Tenant who is happy with there HOME and wants to stay at the same rent with say a 12/24 months AST and new Inventory plus prescribed Information and deposit reprotected.

G_M

silvercar wrote: »

1. Deposit I know the deposit needs to be passed from current landlord (seller) to new landlord (buyer). Presumably this then needs re-protecting and proscribed info and protection details given to tenant.
or the existing registration transferred into new name

2. Inventory The price of the property reflects its condition, so when tenant eventually checks out, what is the base point, the condition of the property when bought or the condition when tenant moved in.
when tenant moved in.
Is there any way of validating the initial inventory (assuming there was one).
check tenant signiture on inventory against signiture on tenancy agreement

If not, it may be just as easy to get seller to return deposit to tenant.
then new LL has no deposit. Very unwise
How does the new landlord ensure this has been done and isn't held liable for return of a deposit he never saw?
Receipt?

3. Tenant check Obviously the existing landlord would be keen to sell and not reveal any problems with current tenant. Can you check out current tenant as buying the property with tenant, means that you want to know the tenant is reliable for the rent.

Obtain copies of
* rent receipts/rent account
* tenancy agreement
* inventory
* tenant check/vetting and references
* tenants previous address as originally provided
* guarantee Deed (if any)
* LL/tenant correspondance
* Records of any reports by tenant of repairs needed
* gas safety certificate etc
* all other tenant and tenancy related documentation

Confirm tenancy type:
* date tenant moved in
* date last agreement became SPT if relevant or
* date last agreement signed and expiry date
* whether current occupants' names match names on last signed agreement

That'll keep you going.....

edit: oh and it goes without saying that you'll be meeting the tenant
* getting a feel for what they are like
* checking the above facts
* finding out their aspirations ie they plan/want to stay for 2 years or are looking to buy and may give notice any day
* whether they are happy on current terms (eg if SPT) or would like a new agreement eg for 12 months security

silvercar

Thanks.

Useful tips, the property is not that old, so the tenant must be on AST or SPT.

I'm trying to put a value (positive or negative) on the fact that a tenant is in the place. As a buyer there is the advantage of no initial void and no need to instruct a letting agent. The downside is being liable for any previous landlord errors eg inadequate inventory or non compliance on deposit protection notifications. Also if the tenant moves on quickly any void will come around quick enough.

The seller is selling as with or without tenant, so they will evict the tenant if necessary, but that gives the seller a delay in completion, so one would hope that the seller factors that into their pricing.

thesaint

silvercar wrote: »

Thanks.

Useful tips, the property is not that old, so the tenant must be on AST or SPT.

No, they could be(but not limited to) an assured tenant.

silvercar

thesaint wrote: »

No, they could be(but not limited to) an assured tenant.

Very unlikely given the age of the property and the length of its current ownership.

I have now had a viewing. Tenants out, in fact the EA says the tenants are very upset that the landlord is selling because they want to remain in the property and so always make themselves scarce at viewings.

The flat is really too small for the tenants, so I can't see them staying there that long. The landlord would have been better to secure vacant possession attend to repairs and tidy the place up before selling.

G_M

silvercar wrote: »

I have now had a viewing. Tenants out, in fact the EA says the tenants are very upset that the landlord is selling because they want to remain in the property and so always make themselves scarce at viewings.

The flat is really too small for the tenants, so I can't see them staying there that long. The landlord would have been better to secure vacant possession attend to repairs and tidy the place up before selling.

Strange attitude!

If they want to stay you'd think they'd be keen to meet the new owner and give a good impression......

You need to meet them. Do a 2nd visit and ask if they can be present (at a time of their choosing), or drop round one evening.....

You can then also get an idea of whether they do indeed find the property too small and are thinking of moving.

If the property needs work which you intend to do, also find out their attitude to this
* will they be pleased/more likely to stay?
* will they resent contractors' interrupting their Quiet Enjoyment - perhaps even be obstructive?
* Might they agree to a new TA at new rent after the improvements?
* are there specific repairs/improvemnets that they want which you've not considered/budgetted for?

45002

silvercar wrote:

Very unlikely given the age of the property and the length of its current ownership.

I have now had a viewing. Tenants out, in fact the EA says the tenants are very upset that the landlord is selling because they want to remain in the property and so always make themselves scarce at viewings.

The flat is really too small for the tenants, so I can't see them staying there that long. The landlord would have been better to secure vacant possession attend to repairs and tidy the place up before selling.

.


So how old do you think this property is then and when did this tenant 1st move in ?

silvercar

Property is about 12 years old and the current owner has owned it for 7 years. I don't know how long the current tenants have been in situ.

silvercar

G_M wrote: »

Strange attitude!

If they want to stay you'd think they'd be keen to meet the new owner and give a good impression......

You need to meet them. Do a 2nd visit and ask if they can be present (at a time of their choosing), or drop round one evening.....

You can then also get an idea of whether they do indeed find the property too small and are thinking of moving.

If the property needs work which you intend to do, also find out their attitude to this
* will they be pleased/more likely to stay?
* will they resent contractors' interrupting their Quiet Enjoyment - perhaps even be obstructive?
* Might they agree to a new TA at new rent after the improvements?
* are there specific repairs/improvemnets that they want which you've not considered/budgetted for?

All the work that needs doing could be left as it is if the tenants preferred, its not essential except for one item that would take only an hour.

The property is being sold with the option of vacant possession. So if a buyer wants to buy with vacant possession, the current owner will have to serve notice on the tenants and wait for them to leave before exchanging contracts.

I would consider the property as one where most likely scenario is there will soon be a void.

Advantage for me would be no letting agents fees to pay.

45002

silvercar wrote:

All the work that needs doing could be left as it is if the tenants preferred, its not essential except for one item that would take only an hour.

The property is being sold with the option of vacant possession. So if a buyer wants to buy with vacant possession, the current owner will have to serve notice on the tenants and wait for them to leave before exchanging contracts.

I would consider the property as one where most likely scenario is there will soon be a void.

Advantage for me would be no letting agents fees to pay.

Even if the current LL issues a s21 to the tenants that's 8 weeks for a start, then LL would have to apply for a possession order if T didn't leave of there own free will, that could be another 2 or 3 months at least , this subject to correct dates on s21 and deposit been protected so on !

Even then if T does not leave by date ordered by court, LL would have to go back to court for a warrant and bailiffs to remove T, could be another few months before vacant possession.

Or perhaps LL just wants to sell to you with T in place, so you have to do All the dirty work....