Apartment with sitting tenant

young_investor_2021

user1977 said:

young_investor_2021 said:

GDB2222 said:

Oh, and has this been window dressed for sale? Is the rent the current market rent?

Just be very careful indeed.

The rent is the current market rent for sure

And is it actually being paid? (and not being paid by some pal of the Vendor, for example?) 

What reason have they given for not exhibiting the lease to you, given that's a standard part of due diligence (and available from the registers anyway if you wanted to bypass the vendor)? 

They said exhibiting the lease would happen after the offer was accepted, between the lawyers. They didn't provide a clear reason other than "it's not common". Can you confirm if it's standard practice to do it before I put in an offer?

elsien

So make an offer, get the information, then renegotiate or walk away if you need to once you’ve read the lease/completed your checks.
Making an offer commits you to nothing. 

theartfullodger

young_investor_2021 said:

The tenant does not have to agree to any new tenancy, nor any changes to the existing one, other than change of landlord 

Ask tenant (yes, tenant, not vendor not agent not solicitor) when they 1st moved in.  

Just because there's a recent new tenancy doesn't mean it's an AST.

Artful: landlord since 2000

I will ask them if I view the property again (and if they are be in). The agent said two months ago, you think they could be lying about this? There are so many things that I could ask everyone, that it's gets overwhelming sometimes. 

I don't doubt that a shiny new AST was signed 2 months ago.  What I am raising is the issue that if tenant has been there since e.g before 27 February 1997 they'd actually have an AT not AST (regardless of shiny new agreement) so no s21, or if before 15 January 1989 then a "Rent ACT" tenancy, nigh on impossible to evict.

It happens, oh yes it happens.

re [quote]I agree that the tenant doesn’t have to play ball. But I would need it done as a requirement for purchase. If not, I’d walk.[/quote]  - errr how's that work then.  If it's a requirement then if signed BEFORE completion then it's invalid (you ain't landlord or owner..), if signed AFTER completion , tenant can simply say no. 

Could you kindly explain for a confused old man like me, please?

young_investor_2021

elsien said:

So make an offer, get the information, then renegotiate or walk away if you need to once you’ve read the lease/completed your checks.
Making an offer commits you to nothing. 

Thanks for the info. As a first time buyer, sometimes I don't know if certain rules are generally accepted or if it's just that vendor's convenience. For example, an agent told me they don't even discuss offers before me proving I've got the funds. However, my thinking is if they see how much money I've got, is it still going to be a fully free negotiation? Maybe it's just my mind here.

Another thing is can I make checks myself  after the offer is accepted, to save soliciting time/money? Because there are things I can check for myself that would quickly rule out the property.

young_investor_2021

theartfullodger said:

young_investor_2021 said:

The tenant does not have to agree to any new tenancy, nor any changes to the existing one, other than change of landlord 

Ask tenant (yes, tenant, not vendor not agent not solicitor) when they 1st moved in.  

Just because there's a recent new tenancy doesn't mean it's an AST.

Artful: landlord since 2000

I will ask them if I view the property again (and if they are be in). The agent said two months ago, you think they could be lying about this? There are so many things that I could ask everyone, that it's gets overwhelming sometimes. 

I don't doubt that a shiny new AST was signed 2 months ago.  What I am raising is the issue that if tenant has been there since e.g before 27 February 1997 they'd actually have an AT not AST (regardless of shiny new agreement) so no s21, or if before 15 January 1989 then a "Rent ACT" tenancy, nigh on impossible to evict.

It happens, oh yes it happens.

re [quote]I agree that the tenant doesn’t have to play ball. But I would need it done as a requirement for purchase. If not, I’d walk.[/quote]  - errr how's that work then.  If it's a requirement then if signed BEFORE completion then it's invalid (you ain't landlord or owner..), if signed AFTER completion , tenant can simply say no. 

Could you kindly explain for a confused old man like me, please?

Thank you for mentioning this, it's yet another thing I would never have thought about. The agent said these are new tenants that just moved in September. So 2-3 months in. 

MaryNB

young_investor_2021 said:

elsien said:

So make an offer, get the information, then renegotiate or walk away if you need to once you’ve read the lease/completed your checks.
Making an offer commits you to nothing. 

Thanks for the info. As a first time buyer, sometimes I don't know if certain rules are generally accepted or if it's just that vendor's convenience. For example, an agent told me they don't even discuss offers before me proving I've got the funds. However, my thinking is if they see how much money I've got, is it still going to be a fully free negotiation? Maybe it's just my mind here.

Another thing is can I make checks myself  after the offer is accepted, to save soliciting time/money? Because there are things I can check for myself that would quickly rule out the property.

What you offer isn't how much you can pay, it's how much you are willing to pay. You just need to be firm with your offer. When I bought my house the EA insisted on a financial check before formally accepting my offer. They could see I could afford more. However I told them that was my best and final and I wouldn't pay anymore. 

MalMonroe

Hello, earlier today you said "It makes sense, but you can never know for sure. The advantage I don't have to pay for marketing the property, but it also makes me wary."

And the fact that you are a FTB and asking opinions on a forum like this add up to making me think you have more than one doubt.

As elsien has said, making an offer doesn't commit you. But at some point, I'd definitely want to get to know the tenants and not just treat them as a money-making scheme.

If you are not sure, you might be better off buying a vacant property and finding your own tenants, at least that way you'll know who you are letting to and although you may have to pay more for attracting them, etc., it'd be well worth it in the end. 

GDB2222

theartfullodger said:

young_investor_2021 said:

The tenant does not have to agree to any new tenancy, nor any changes to the existing one, other than change of landlord 

Ask tenant (yes, tenant, not vendor not agent not solicitor) when they 1st moved in.  

Just because there's a recent new tenancy doesn't mean it's an AST.

Artful: landlord since 2000

I will ask them if I view the property again (and if they are be in). The agent said two months ago, you think they could be lying about this? There are so many things that I could ask everyone, that it's gets overwhelming sometimes. 

I don't doubt that a shiny new AST was signed 2 months ago.  What I am raising is the issue that if tenant has been there since e.g before 27 February 1997 they'd actually have an AT not AST (regardless of shiny new agreement) so no s21, or if before 15 January 1989 then a "Rent ACT" tenancy, nigh on impossible to evict.

It happens, oh yes it happens.

re [quote]I agree that the tenant doesn’t have to play ball. But I would need it done as a requirement for purchase. If not, I’d walk.[/quote]  - errr how's that work then.  If it's a requirement then if signed BEFORE completion then it's invalid (you ain't landlord or owner..), if signed AFTER completion , tenant can simply say no. 

Could you kindly explain for a confused old man like me, please?

Easy. We all know that it's incredibly easy for a landlord to omit something from the plethora of paperwork required for an AST, or get something wrong. I'd just want the landlord to reissue a completely new tenancy agreement, whilst I check that all the correct procedures have been carried out to the letter. 

How many landlords, for example, actually demonstrate that the fire alarms work and get the tenant to sign  to confirm they've been shown this? It's not sufficient for the inventory clerk to check them.

young_investor_2021

canaldumidi said:

1) yes, assuming you have seen and checked  the tenancy agreement, all the tenant vetting documents,  the tenant set-up documents (gas, gov leaflet etc etc), rent schedule, deposit docs, etc. Take nothing for granted.

2) it's usual for the lease tbe made available during conveyancing. Some sellers willbe helpful andprovide it earlier, or if the Land Ragistry has a copy you can apply for it on Form OS2 - GOV.UK for £7 by post

3) using cash means no mortgage nterest tooffset against ax. Have you done a full budget? Your costs willbe much greater than you have listed.

As others have said, you iherit the existing tenance. The tenant does not need to sign a new one with you, and why should they.

Thank you for addressing all points! I am a first time buyer, and therefore learning on the job. Regarding point 3, with the budget, I followed your link, thanks. However, many of these costs are unknown to me. Is there a rule of thumb on what an extra sum would be to cover for those costs? Generally speaking, given I won't have a mortgage, I expect any extra costs to be covered by the rent (even though I will of course have some extra just in case). To simplify the procedure, is it acceptable to simply chose a property with maximum yield (rent-leasehold fees-agent fees), given that the rest would likely be almost the same in all apartments? (assuming decent apartment condition)

Grumpy_chap

young_investor_2021 said:

I'm planning to buy a property for letting, and my main focus is to maximize the yield. I saw an apartment with ~140 years left on lease, which has a sitting tenant that started the tenancy 2 months ago. I don't plan on taking a mortgage. The yield works out around 5.7% (after subtracting the ground rent, service charge and agent management fees). My questions to the community are the following:

1. Is it safe to buy with a sitting tenant? I'm wondering if the owner had some problems and wanted to sell right after the tenancy started.

2. After reading about leasehold, I've heard the agreement may have restrictions (e.g. asking permission for renovation or bringing pets). However the owners seem to not want to share the lease before an offer was agreed.

3. Would you advise the yield is acceptable? (The location is rather close to the city centre) Am I missing any higher profit strategies and risking to lock my money in?

This "sitting tenant who started 2 months ago" really needs to be understood.  If the current owner of the flat long lease (LL) was planning to sell, and had vacant possession as recently as October, then deciding to let and then sell would be an unusual course of action.  If the LL was not planning to sell, then you need to understand why this change of approach has arisen so quickly and that may not be easy to establish.  Events happen that can force a change in strategy, so it is not always a bad thing, just not something that I would see as planned.

Answering the questions:
1. YES - this happens quite often.  You need to do extra due diligence.  Sitting tenant often impacts the market value of the property.

2.  You want it before the offer is agreed.  The vendor does not need to provide it.  Submit an offer and, if it is agreed, the details will be forthcoming.  Withdraw if they are not provided or do not provide the surety you require.

3.  Yield just shy of 6% after fees is extraordinary - are you sure the maths are correct?  No-one can say whether a 5.7% yield for your investment is acceptable as that is something only you can say - what would your alternative investment strategies provide by way of return versus risk?

Other factors to consider, and it sounds like you are a first-time-buyer, is that having the rental property may impact on first-time-buyer schemes if / when you come to buy your own property to live in.  

If you are buying this flat with the intention to let for a bit and then move in as your primary residence, be aware that gaining vacant possession when you decide that is something you require may not be a quick process.