Buying a flat to live in - currently with tenants in-situ

LdnFtB

Hi all,

Thank-you for all your helpful responses. If I can summarise these are the potential risks:
1) Tenants don't vacate on time. The costs resulting from this would be a time delay to the transaction and also, depending on length of delay, mortgage offer could expire? Extra legally costs too.
2) Tenants obstruct survey (either through not allowing access or because their possessions and furniture obscure parts of the property). This means damage and maintenance issues could be missed.
3) Tenants could damage property after mortgage survey. Additional survey costs and additional costs to rectify damages.
4) Is there the possibility that, regarding all the above, there will be fewer lenders willing to offer us a mortgage?

And finally it's occurred to me that there's another which isn't related to the tenants:
5) Relating to the need to refurbish, there is also the risk that freeholder permission to alter may be refused.

Given all the above, there seem to be a few ways to skin this cat.

The first is to assume all the risk and apply for mortgages, surveys and solicitors immediately after the offer is accepted before any notice to vacate is served on the tenants. Exchange before vacation too. Alterations permission is also at our risk. This would be our lowest offer.

The second is to assume most of the risk by doing the same as above but delaying exchange until after vacation. Not quite as risky as the first but the tenants could still overstay / obstruct. Offer would be a bit higher.

The third is for the landlord to assume most of the risk by us only proceeding with instructions once the tenants are out. Permissions to alter will be at our risk. This would be a higher offer.

The final route is for the same as the above but to roll up the permission for alterations application into the conveyancing. This obviously results in the longest voids period for the landlord and they bear the risk of us pulling out. This would be our highest offer.

csgohan4

where's the bargepole when you need it?

Cakeguts

You can't exchange while the tenants are still living there unless you have a buy to let mortgage. The property has to be vacant before you exchange or you could risk buying a the flat with the tenants still living there and then you become the new landlord. So the flat has got to be vacant on exchange.

This flat is not going to be easy to buy until it is vacant. The landlord is probably hoping to sell to another landlord. You can usually tell if this is the case because the flat will be cheaper than one that is similar and vacant or lived in by an owner occupier. Once the flat becomes vacant there is nothing stopping the landlord from taking it off the market and then putting it back on at a higher price because it is now vacant.

So if you are trying to buy this flat because it appears good value for money that is the price for another landlord to buy it at. Vacant it will be the same price as any other similar flat in the same area.

LdnFtB

Cakeguts wrote: »

You can't exchange while the tenants are still living there unless you have a buy to let mortgage. The property has to be vacant before you exchange or you could risk buying a the flat with the tenants still living there and then you become the new landlord. So the flat has got to be vacant on exchange.

Ah that's good to know. Thank-you, that's alleviated a major concern.

Cakeguts wrote: »

This flat is not going to be easy to buy until it is vacant.

This is what we're banking on in terms of being able to drive a hard bargain. From the looks of it not many people have much of a risk appetite for this kind of purchase. And very very few landlords are buying in London at the moment as both rents and prices are on a downwards trend so we're not worried about competition in that regard.

Cakeguts

LdnFtB wrote: »

Ah that's good to know. Thank-you, that's alleviated a major concern.



This is what we're banking on in terms of being able to drive a hard bargain. From the looks of it not many people have much of a risk appetite for this kind of purchase. And very very few landlords are buying in London at the moment as both rents and prices are on a downwards trend so we're not worried about competition in that regard.

But you can't buy it until it is vacant so you can't drive a hard bargain. You are in the same position as anyone else buying it apart from another landlord.

PawelK

LdnFtB wrote: »

Hi,

I'm looking at potentially purchasing a flat to live in from a landlord. The property is currently tenanted, although the estate agent assures me that the flat is being offered with 'full vacant possession' - i.e. the tenancies will be terminated as part of the conveyancing process.

The obvious risk to me is that either the tenants squat after the tenancy is ended, or the landlord wrongly serves the section 21 notice and they can continue in the property. My initial thoughts are to delay exchange until after the flat is vacated, but then ensure a fairly quick turnaround between exchange and completion (i.e. one week or a fortnight).

The other risk that's occurred to me is that given that this is the tenants home, they are fully within their rights to refuse access for viewings and surveys and I respect that. This could further delay the transaction process.

What are the other potential pitfalls I should watch out for, and how to structure the transaction to ensure that the risk is minimised?

I am in the same situation and also buying a London flat. If you want to exchange private messages or even meet in person to discuss and compare our situation, I would be up for that. To be homest it could give some reassurance.

eddddy

Cakeguts wrote: »

You can't exchange while the tenants are still living there unless you have a buy to let mortgage. The property has to be vacant before you exchange or you could risk buying a the flat with the tenants still living there and then you become the new landlord. So the flat has got to be vacant on exchange.

That's not actually correct.

You would exchange contracts to buy the property with vacant possession (even if there are tenants in it on the date of exchange).

If the seller is unable to give you the property with vacant possession on completion day, the seller is in breach of contract - and you can claim damages from the seller.

If you think there is a risk of this happening, tell your solicitor in advance not to complete until you give instructions by phone.

Then visit the property on completion day. If it's vacant, instruct your solicitor to complete. If the tenants are still there, instruct your solicitor not to complete.

G_M

If you decide to proceed with this property, I'd make your offer subject to the condition that you will not be progressing the purchase until the tenants have left. ie

* you won't make your mortgage application
* you won't instruct your solicitor to start work
* you won't insrict a surveyor

as all the above cost you money.

As soon as the property is vacant, you will proceed.

If the seller won't accept this, I'd look elsewhere rather than fork out £ on a tenanted property.

teddysmum

OP a point you missed from your list is that having spent out on surveys, searches and solicitor fees the tenants are proving so difficult that the sale is withdrawn.


This can happen to any buyer, 'out of the blue' but here the risk is higher.

LdnFtB

PawelK wrote: »

I am in the same situation and also buying a London flat. If you want to exchange private messages or even meet in person to discuss and compare our situation, I would be up for that. To be homest it could give some reassurance.

Is your estate agent named ********? Don't want to be any more specific than that but chance would be a fine thing if we're both looking at the same place.