Renting out property before selling

Jimmithecat

Asking for a friend

Due to relocation for work their flat in Bristol has been rented out for the last year.
They are on a fixed rate mortgage until December 2023. Would like to hold off completion of any sale  until then to save paying early redemption payment to Halifax.
As they are unlikely to return to Bristol and the increase in interest rate they wish to sell.
Put on the market and have had an offer they have accepted - buyer allegedly backed by parents so in no chain.

Current tenants move out this month.
Buyer would like to rent the property they are buying until sale goes through.

The sellers understand there may be issues with this - ie tenant moving in and not going ahead with the sale 

Any thoughts or advice please?

user1977

I suppose not quite as crazy as renting a formerly owner-occupied property (as I presume your friend has already ticked all the regulatory boxes about letting out the property) - but sellers need to be aware they'll have the risk of being stuck with another tenant.

How much longer does the consent to let from the lender last?

theartfullodger

You don't know tenants are really leaving until they're gone   If they stay delay, courts, expense, could be months.  

Get vacant possession then sell...

PRAISETHESUN

I'd also recommend you ensure vacant possession of the property by not taking on any new tenants. No guarantee they will leave by the required date, no guarantee they won't trash the place, etc. I'd personally just weather the cost of the early redemption/void period as part of the cost of running a letting business...

propertyrental

1) no guarantee the current tenants will leave as expected. 
2) no guarantee new tenants will buy.

Don't do it. Wait for current tenancy to actually end (not necessarily the same as them apparently leaving), then  ask if current buyers are willing to wait till Dec (without a tenancy). If they say no, re-advertise. It could take 3-4 months anyway to reach Completion.

Ad do the maths too: Early redemptio fee for a month or two vs 2 months rent.

Ksw3

Would they be informing the tenants they would be kicked out before they have even finished unpacking? 

_Penny_Dreadful

A couple of things would concern me as the seller.  Firstly, that this person moves in as a tenant and then never decides to buy the place.  Secondly, that once they move in they will get to see the property in all its glory for months before buying and I would be concerned about gazundering.

Gavin83

_Penny_Dreadful said:

Secondly, that once they move in they will get to see the property in all its glory for months before buying and I would be concerned about gazundering.

This is a good point. No house is perfect and they’re likely to find out niggly things that might cause issues. They might also conclude that it’ll be easier to gazunder your friend full stop given they’re already living in the house.

Who served notice, your friend or the tenant?

PRAISETHESUN

Re-reading this, I didn't realise that the potential buyer was going to be the new tenant in the property.

I still echo my previous comments. There's no guarantee that the potential buyer will actually complete on the sale, and then you are stuck with problem tenants you need to deal with, as well as then having to find another buyer. Much easier just to sell with vacant possession, and factor in the the early redemption/void period as part of the costs.

eddddy

A few people have mentioned the risk that the potential buyer might move in as a tenant - then not complete the sale.

You can remove that risk by exchanging contracts with the buyer before the tenancy starts. 


So, for example, there's a 3 month gap between exchange and completion (Oct to Dec), and the buyer rents the property during that period. However...

• That assumes that your friend still has consent to let from Halifax

• Your friend's solicitor will warn your friend not to exchange contracts until the current tenants have vacated

• Realistically, to be ready to exchange in time, the buyer would have to start the conveyancing process and mortgage application before the current tenants move out. Not all buyers would be happy to do that.

Edit to add..

I guess there's still a tiny risk that the buyers exchange contracts, but don't complete. But that's very unlikely.

propertyrental

eddddy said:

A few people have mentioned the risk that the potential buyer might move in as a tenant - then not complete the sale.

You can remove that risk by exchanging contracts with the buyer before the tenancy starts. 


So, for example, there's a 3 month gap between exchange and completion (Oct to Dec), and the buyer rents the property during that period. However...

• That assumes that your friend still has consent to let from Halifax

• Your friend's solicitor will warn your friend not to exchange contracts until the current tenants have vacated

• Realistically, to be ready to exchange in time, the buyer would have to start the conveyancing process and mortgage application before the current tenants move out. Not all buyers would be happy to do that.

Edit to add..

I guess there's still a tiny risk that the buyers exchange contracts, but don't complete. But that's very unlikely.

Plus of course OP becomes a LL with all the tax and legal obligations that go with that....