Buying a home to live in that has a tenant in situ need advice

theartfullodger

Maahes said:

SneakySpectator said:

Because I'm 36... A 25 year mortgage is already making me work until 61, I really don't want to be working into my 70's. 

I have a mortgage until I'm 79 and I have no intention or working past my mid-sixties. So long as you have decent pension arrangements you can retire with a mortgage, and you have more than enough time to get a pension sorted.

Similarly I have a mortgage (interest only) ending during the year I am 80 (I'm 77).  I don't work, have pensions and savings and a property bringing in rent.  And can easily pay off remaining mortgage with savings. 

Just about remember working... (Not recommended...)

Uriziel

Do not do anything until you can view the property and it is vacant.

GDB2222

My son’s girlfriend has just bought her first home. The flat was tenanted when she viewed it. She instructed solicitors to get on with the purchase. The landlord served notice. The tenants duly left on time, leaving the flat in a good condition. Contracts were exchanged. It all went smoothly, and the sale completed a month after the tenants left.

The op has said that most of the flats on the market are tenanted, so he has to work with whatever is available. 

Tiglet2

GDB2222 said:

My son’s girlfriend has just bought her first home. The flat was tenanted when she viewed it. She instructed solicitors to get on with the purchase. The landlord served notice. The tenants duly left on time, leaving the flat in a good condition. Contracts were exchanged. It all went smoothly, and the sale completed a month after the tenants left.

The op has said that most of the flats on the market are tenanted, so he has to work with whatever is available. 

Exactly.  It could be that the tenants go without any problems whatsoever.

It sounds as though OP is not selling anything and doesn't have a huge budget to work with, so does have to work with whatever is available. 

If OP patiently waited to complete on this flat, either by expiry of the Section 21 or when the courts decide they have to vacate (in 6+ months), there wouldn't be an issue.  But OP has said they don't want to wait that long.....

GDB2222

Tiglet2 said:

GDB2222 said:

My son’s girlfriend has just bought her first home. The flat was tenanted when she viewed it. She instructed solicitors to get on with the purchase. The landlord served notice. The tenants duly left on time, leaving the flat in a good condition. Contracts were exchanged. It all went smoothly, and the sale completed a month after the tenants left.

The op has said that most of the flats on the market are tenanted, so he has to work with whatever is available. 

Exactly.  It could be that the tenants go without any problems whatsoever.

It sounds as though OP is not selling anything and doesn't have a huge budget to work with, so does have to work with whatever is available. 

If OP patiently waited to complete on this flat, either by expiry of the Section 21 or when the courts decide they have to vacate (in 6+ months), there wouldn't be an issue.  But OP has said they don't want to wait that long.....

The OP’s view on this ought to depend on how upset he would be if he spends money on the solicitor, getting a mortgage etc, and then the sale doesn’t go through for some reason. This is always a risk with any purchase, and I agree that the risk might be higher because of the tenant. But, how much higher? My experience with tenants (since the 1980s) is that most of them are pretty reasonable people, who don’t want a lot of hassle.  

Generally, purchases take around 4+ months to go through, getting searches and management packs etc, so it’s not uncommon for landlords to wait until they have a buyer who has at least appointed a solicitor before they serve notice on the tenant. The advice on this forum is often to spend no money on legal fees until the property is empty, but the seller may well not be happy with that. 

Even if the op finds an owner occupied flat to buy, there’s plenty of opportunity for that transaction to fall through, too. How do you calculate the difference in the risks? 

m0bov

The LL is profiting by keeping rent coming in whilst it's for sale. The buyer is taken the risks whilst the LL profits.

RHemmings

m0bov said:

The LL is profiting by keeping rent coming in whilst it's for sale. The buyer is taken the risks whilst the LL profits.

I don't think it's simple as that it's the buyer taking the risk. When contracts are exchanged, these will typically be for vacant possession. Therefore, if exchange does happen and the tenant is still there, then the landlord will most definitely legally be on the hook. 

Therefore, the seller may not want to exchange while the tenant is there. If exchange then gets pushed back because the tenant doesn't leave, then there is the risk that the buyer pulls out, and both seller and buyer lose out.

It's often been advised on here to not sink money into the purchase until the property is vacant. If the buyer says that the purchase will stall until the tenant has moved out, then it will be possible to see how the seller reacts.

If I was the buyer, I would make it very clear that no exchange of contracts will happen unless the contract is for vacant possession. And that exchange of contracts is expected by <date>. 

GDB2222 said:

Even if the op finds an owner occupied flat to buy, there’s plenty of opportunity for that transaction to fall through, too. How do you calculate the difference in the risks? 

(Cut and paste of comment failed. Italics are the quote)

This is very true; there are all sorts of things that can derail a purchase. But, here we're talking about one particular problem. Which it appears that the OP's seller is making a bigger risk by not giving notice. E.g. in the following quote from the OP.

SneakySpectator said:

Yeah I'm having second thoughts as well now, the estate agent straight up told me that once we are further down the line and close to sealing everything, the tenants will be issued their section 21 notice. 

So I'm looking at 2 months of conveyancing before the section 21 even gets issued, then 2 months notice for that, then if they refuse to leave another few months, then court orders, repossession order etc. I was "assured" by the EA that 

"I’ve spoken with the owner, and he has confirmed he will give notice to the tenants when we are further along the legal process, and we won’t exchange contracts until the tenants have moved out and you’ve viewed again to ensure that your happy. You solicitor will also advise to view the property prior to exchange anyway."

But I've not even done an initial survey yet and I don't want to start sinking solicitor fees into this only for it to drag out for half a year only to find out there's some major issue after the tenant left. 

Herzlos

SneakySpectator said:

This makes a lot of sense actually. I thought you get charged for making overpayments though?

Generally you only get charged if you overpay by about 10% when in a fixed rate deal, but even an overpayment of £50/month will potentially knock a couple of years off at the end. Or you can save money up and overpay when changing deals. 

Normally, you'll only get a fixed rate deal for 1-5 years and have to negotiate a new deal each time they expire. If you do nothing you default to a standard variable rate which is more expensive but has no early repayment charges. As time goes on you'll have a lower LTV and get better rates too. 

There's no reason you can't take out a 30 year mortgage, even a 31 as they probably want it cleared before you retire, to improve affordabiliy whilst planning to have it paid off earlier. 


On this property, it sounds like the landlord is expecting the tenant to leave on July 31st so you may be OK, but if they don't and a S21 hasn't been filed yet it could easily be July 2026 before it's vacant. You may as well hang on given it's only 3 weeks away but I'd try and avoid spending money until you know if it's vacant or not, and then you can either walk away or go full steam ahead. 

GDB2222

m0bov said:

The LL is profiting by keeping rent coming in whilst it's for sale. The buyer is taken the risks whilst the LL profits.

When owner occupiers sell, they don’t move out before they put the property on the market. They profit by continuing to live in the place. The buyers are taking the risk of the sellers simply deciding not to sell. 

Property is in short supply in this country, and it is sensible that we (as a nation) try to make the best use of it. Leaving property empty for 4-6 months while it is being sold is extremely wasteful. 

Tabieth

GDB2222 said:

m0bov said:

The LL is profiting by keeping rent coming in whilst it's for sale. The buyer is taken the risks whilst the LL profits.

When owner occupiers sell, they don’t move out before they put the property on the market. They profit by continuing to live in the place. The buyers are taking the risk of the sellers simply deciding not to sell. 

Property is in short supply in this country, and it is sensible that we (as a nation) try to make the best use of it. Leaving property empty for 4-6 months while it is being sold is extremely wasteful. 

Clearly owner occupiers don’t move out before they put their property on the market. But they do enter into a contract where they legally commit to full vacant possession. If for whatever reason the seller does not move out on completion day then completion doesn’t happen and they are in breach of that contract. So the buyer has assurance that, while not 100% guaranteed, the seller will leave the property.

Contrast that with tenants who have entered into no such legal contract. If they don’t move out it’s the seller who is legally liable, not the tenant. The buyer has far less assurance of full vacant possession as the tenant (unlike an owner occupier) has nothing to lose by staying on.