Buying with tenants in situ BUT leaving prepaid rent to previous owner to boost offer

_Penny_Dreadful

lb00 said:

My brother and I are working in London and have found a nice flat we would like to buy. The flat asking price is 675, we have offered 620 which was rejected. The flat is currently being rented with the tenancy expiring end of September. We are happy to wait until Sep to move in.

As we are FTB we do not want to go above 625k to avoid losing the stamp duty relief and pay 8k more. The EA has proposed that we offer 625 and complete quickly by the end of May, but agree to leave the rent from June to September (10k) with the seller. This would mean the effective offer price is 635k. The crucial bit is that the rent has been paid in advance for the full year, so it's effectively already with the seller, meaning we wouldn't need to transfer it to them. Is this legal?

What scares us is that we would still have to enter the lease with the tenant from June to September, becoming the new landlord and therefore being responsible for property maintenance. Is there a way we can buy the property but the seller can still act legally as the landlord until the end of the tenancy, being responsible if anything happens? Or is it possible, even if we become the landlord, to require formally the old seller to step in if something breaks down between June and September?

We are buying cash so no need to have vacant possession

Thanks very much in advance for your help!

As other posters have pointed out, the tenancy won't just expire in September.  The fixed term might end in September but the tenant's right to continuing occupying the property will not come to and end.  The tenancy can only be ended by the tenant or a court so unless the tenant decides to serve their own notice you will be left with having to serve a Section 21 and going to court for a possession order.  There are many things that can invalidate a Section 21 and you would have to be confident that all the required prescribed information had been issued correctly.  Depending on the borough you may also find there is selective licensing in the area.  I consider myself a fairy savvy landlord and I would not buy a tenanted property in England for fear that the previous landlord had forgotten some crucial piece of prescribed information leaving me up the proverbial creek.  I am also somewhat suspicious of landlords in England selling tenanted properties rather than offering vacant possession.

If you buy this property in June then any rent the tenant has paid up until September will legally be yours so even if know money changes hands for it I would expect your purchase price to include the value of this rent with regards to SDLT and CGT returns.  If anything I would offer less for a tenanted property, not more, due to it being a riskier purchase.

You could ask the current landlord to act as your agent but I suspect the answer would be no.  He's cashing out for a reason and letting agent's in England must be registered with a redress scheme so it's not a simple case of asking the current landlord to continue until September or whenever the tenant eventually vacates the property.

Emmia

Aside from the tenancy issues, you've offered £40k under asking if the rent is included and £55k under asking if it's not. 

Is this place priced fairly for the area? If it is then the seller is going to want more money, and won't give a fig about the stamp duty you're seeking to avoid with this low ball offer.

theartfullodger

As said tenancy does not end in Sept.  If you wish to evict the tenants DON'T BUY unless you have ALL these bits of paperwork tenants can contest eviction in court and very likely win... see...

https://nearlylegal.co.uk/section-21-flowchart/

&

https://england.shelter.org.uk/housing_advice/eviction/section_21_eviction/how_to_check_a_section_21_notice_is_valid

That current owner/landlord is selling with tenants in points to him not having the paperwork - so you likely stuffed.

lb00

theartfullodger said:

Emmia said:

_Penny_Dreadful said:

Thanks all. 
I've talked to a solicitor this morning and they argue that I could qualify for stamp duty relief as there is the intention to occupy the property as your main residence . Because basically as soon as the tenant leaves I would move in and live there after some brief renovation work.

What if I had the tenant give notice before I embark on the sale? EA has told me it is a student completing their programme and going back to their country at end of tenancy. If so, I could require to see they served notice before committing with the purchase and then there should be no problem with the eviction.

Thanks

Emmia

lb00 said:

theartfullodger said:

Emmia said:

_Penny_Dreadful said:

Thanks all. 
I've talked to a solicitor this morning and they argue that I could qualify for stamp duty relief as there is the intention to occupy the property as your main residence . Because basically as soon as the tenant leaves I would move in and live there after some brief renovation work.

What if I had the tenant give notice before I embark on the sale? EA has told me it is a student completing their programme and going back to their country at end of tenancy. If so, I could require to see they served notice before committing with the purchase and then there should be no problem with the eviction.

Thanks

How are you going to get someone else's tenant to give notice?

The current landlord needs to give them notice, and have them out so you can purchase with vacant possession.

This doesn't deal with the low offer you've put in though, and why would the current owner go through the hassle of eviction to get £50k less than they want for the property? By offering what you are you're saving yourself around £60k through the low offer and the stamp duty - and you're cash buyers, so it's not as though you're at the limit of your borrowing.

BlueVeranda

lb00 said:

We are buying cash so no need to have vacant possession

While paying cash means that you're not subject to a mortgage lenders conditions, if you don't have vacant possession you will effectively be buying as a landlord not a residential occupier. The potential pitfalls of which have been pointed out by other posters.

It's not a headache I would have wanted to deal with for my first property, but if you are set on going ahead, I would recommend you read up on the obligations you'll have as a landlord and the requirements you'll be subject to. It is relevant because even something as simple as serving notice on the tenant to gain possession requires you to follow the correct procedures for the notice to be valid.

lb00

Emmia said:

How are you going to get someone else's tenant to give notice?

The current landlord needs to give them notice, and have them out so you can purchase with vacant possession.

This doesn't deal with the low offer you've put in though, and why would the current owner go through the hassle of eviction to get £50k less than they want for the property? By offering what you are you're saving yourself around £60k through the low offer and the stamp duty - and you're cash buyers, so it's not as though you're at the limit of your borrowing.

If her intention is to leave as they are moving back to their country, it would be in their interest to give notice not to pay rent after they leave which is before the tenancy ends. 
So it would be: tenant gives notice to previous landlord i.e. seller. I buy before tenancy ends making sure I see the notice in writing. I become the new landlord but as they have given notice I am already sure they will move out.
Wouldn't this work? Am I missing something?
Sorry and thanks for your patience and kindness

Emmia

lb00 said:

Emmia said:

How are you going to get someone else's tenant to give notice?

The current landlord needs to give them notice, and have them out so you can purchase with vacant possession.

This doesn't deal with the low offer you've put in though, and why would the current owner go through the hassle of eviction to get £50k less than they want for the property? By offering what you are you're saving yourself around £60k through the low offer and the stamp duty - and you're cash buyers, so it's not as though you're at the limit of your borrowing.

If her intention is to leave as they are moving back to their country, it would be in their interest to give notice not to pay rent after they leave which is before the tenancy ends. 
So it would be: tenant gives notice to previous landlord i.e. seller. I buy before tenancy ends making sure I see the notice in writing. I become the new landlord but as they have given notice I am already sure they will move out.
Wouldn't this work? Am I missing something?
Sorry and thanks for your patience and kindness

How do you know that is their intention? They're under no obligation to do this and could change their mind between now and September - maybe they meet someone, get a great opportunity etc. and then it will move to a rolling tenancy.

I wouldn't take on a tenant in this situation for the reasons already pointed out - do you know that all the paperwork etc., with the current landlord is in order?? Massive gamble.

Only buy with vacant possession, unless your intention is to be a landlord.

Emmia

lb00 said:

My brother and I are working in London and have found a nice flat we would like to buy. The flat asking price is 675, we have offered 620 which was rejected. 

As it is, you haven't got an accepted offer for this place so this whole discussion is a bit pointless. 

Put in an acceptable offer, and then worry about the tenant issues, or buy a different (untenanted) spot.

cr1mson

Why would the tenant give notice now 5 months in advance?

And indeed if it is a fixed term tenancy they may not have to be depending on wording of the tenancy they may just end it my moving out prior to last day.

Options when your fixed term tenancy ends - Shelter England

IMHO Owner/Landlord is wanting to have their cake and eat it and shouldn't have put it on the market without vacant possession.

Personallly would be looking elsewhere.