Advice on buying buy2let with tenants

GemmaZE

Hi wise ppl in MSE forum, we need some advice on pros and cons of buying buy to let with existing tenants.

We are not professional landlords, currently in the process of buying a property with tenants in, as the house is outside the school catchment area and needs extension to be big enough for us. Our plan is let out the property for 2-3 years until my eldest starts secondary, do up the house and move in.  We have got buy-to-let mortgage offer in place.

The house is currently let out as HMO (4 adults 3 household) without HMO license. And vendor seems to think we are keeping the tenants as we are buying as buy-to-let. Mainly miscommunication at EA side. At the time of offer, We did mention it is an option but we need to see the contracts etc to make that decision. no where was ever confirmed as offer condition. That was way before we found out they were let as HMO as the property is in a different borough with tighter criteria etc. 

So long story short, the tenants are given notice to leave by October and we aim to exchange / complete end of Sept latest, and seller wants to complete ASAP. 

Taking tenants is obvious an issue for us as we need HMO license, that application takes month+costs. The fact vendor is let out without HMO license will cause potentially issues when taking on existing tenancy agreement.

Would like to hear advise on what we need to watch out in this situation. 

Massive thanks ! 

[Deleted User]

GemmaZE said:

Hi wise ppl in MSE forum, we need some advice on pros and cons of buying buy to let with existing tenants.

We are not professional landlords, currently in the process of buying a property with tenants in, as the house is outside the school catchment area and needs extension to be big enough for us. Our plan is let out the property for 2-3 years until my eldest starts secondary, do up the house and move in.  We have got buy-to-let mortgage offer in place.

The house is currently let out as HMO (4 adults 3 household) without HMO license. And vendor seems to think we are keeping the tenants as we are buying as buy-to-let. Mainly miscommunication at EA side. At the time of offer, We did mention it is an option but we need to see the contracts etc to make that decision. no where was ever confirmed as offer condition. That was way before we found out they were let as HMO as the property is in a different borough with tighter criteria etc. 

So long story short, the tenants are given notice to leave by October and we aim to exchange / complete end of Sept latest, and seller wants to complete ASAP. 

Taking tenants is obvious an issue for us as we need HMO license, that application takes month+costs. The fact vendor is let out without HMO license will cause potentially issues when taking on existing tenancy agreement.

Would like to hear advise on what we need to watch out in this situation. 

Massive thanks ! 

Firstly notice is just notice that the landlord might go to court for a possession order come October. It does not mean the tenants have to leave the property. 

Secondly, assuming this is in England or Wales, and a Section 21 has been issued it will be invalid if the property requires a licence and doesn’t have one.  

Edit to add that you’ll need a specific type of mortgage for a HMO and not just a BTL mortgage. 

elsien

And the plan for if the tenants decline to leave in October and you have to go to court to evict them? 

And if there should be a licence but isn’t, then are all the fines and penalties likely to come down on you as the current landlord? 

What is your target market for tenants instead of having an HMO? 

gwynlas

If you plan on letting anyway why not think of registering and buying it as a HMO, return is better?

user1977

GemmaZE said:

Taking tenants is obvious an issue for us as we need HMO license, that application takes month+costs. The fact vendor is let out without HMO license will cause potentially issues when taking on existing tenancy agreement.

And probably prohibit you from buying with a mortgage anyway. Back to the drawing board, I think...

GemmaZE

 We have checked our Mortgage offer. HMO is allowed and we do have an option here. 

GemmaZE

elsien said:

And the plan for if the tenants decline to leave in October and you have to go to court to evict them? 

And if there should be a licence but isn’t, then are all the fines and penalties likely to come down on you as the current landlord? 

What is your target market for tenants instead of having an HMO? 

Thanks for your reply. We obvious want to avoid the trouble. I am worried about fines and penalty involve as it has been let without license for a long period of the time.

our target market is family, not HMO.

GemmaZE

gwynlas said:

If you plan on letting anyway why not think of registering and buying it as a HMO, return is better?

It’s an option here, but we would like to go with clean slate. With new tenants we netted instead of inheriting on existing tenants and agreement. 

elsien

GemmaZE said:

elsien said:

And the plan for if the tenants decline to leave in October and you have to go to court to evict them? 

And if there should be a licence but isn’t, then are all the fines and penalties likely to come down on you as the current landlord? 

What is your target market for tenants instead of having an HMO? 

Thanks for your reply. We obvious want to avoid the trouble. I am worried about fines and penalty involve as it has been let without license for a long period of the time.

our target market is family, not HMO.

You really need to resolve that before you exchange - is there a reason the current landlord isn’t looking at the licensing now (other than wanting to pass the buck)?  

If the current tenants do hold out for being evicted (and they may not), you’re aware of just how long this could take? 

Have you looked into whether  there are any factors which could make their notice to quit invalid? 

[Deleted User]

elsien said:

GemmaZE said:

elsien said:

And the plan for if the tenants decline to leave in October and you have to go to court to evict them? 

And if there should be a licence but isn’t, then are all the fines and penalties likely to come down on you as the current landlord? 

What is your target market for tenants instead of having an HMO? 

Thanks for your reply. We obvious want to avoid the trouble. I am worried about fines and penalty involve as it has been let without license for a long period of the time.

our target market is family, not HMO.

You really need to resolve that before you exchange - is there a reason the current landlord isn’t looking at the licensing now (other than wanting to pass the buck)?  

If the current tenants do hold out for being evicted (and they may not), you’re aware of just how long this could take? 

Have you looked into whether  there are any factors which could make their notice to quit invalid? 

We know that if a Section 21 has been issued and the property doesn’t have a licence but should then the notice will be invalid. 

https://www.legislation.gov.uk/ukpga/2004/34/section/98

Slithery

GemmaZE said:

So long story short, the tenants are given notice to leave by October and we aim to exchange / complete end of Sept latest, and seller wants to complete ASAP.

You do realise that just because notice has been served doesn't mean the tenants have to leave?

If all the paperwork isn't in order (which seems like the case here) you may never be able to evict. Even if it is all in order it could still take you years to get rid of the current tenants.