What to Consider when Purchasing a Property with Tenants in Situ

There are many reasons why properties with tenants in situ are attractive to prospective landlords:

• A lower guide price – Generally, they are cheaper than properties sold with vacant possession. This is because the market is restricted to investors only whilst the tenants remain living there.
• A guaranteed rental income once the transaction has been completed – Even if your completion date is mid-month, your solicitor will apportion the rental payment between the buyer and the seller.
• A tenancy agreement is already in place – This will relieve the stress of finding a new tenant upon completion.
• No immediate refurbishment will be needed – The tenants living in the property will have made the space ‘their own’, and therefore, it will have been maintained to a fair standard.

In short, thoroughly.

Do not be fooled by sparkling interiors and seemingly ‘happy’ tenants. Instruct a surveyor to inspect the property and meet with the tenants in situ. Have they built a strong relationship with the existing landlord? Do they have any grievances about the property?

Do not rely on the existing landlord’s due diligence work and conduct your own investigations. Ensure that all of your paperwork is in order before the exchange of contracts.

You should be alive to your obligations outlined in HM Government’s ‘How to rent: the checklist for renting in England’ [see sources below] and ensure that the existing tenants have the following:

• A gas safety certificate – You cannot assume that this was provided at the outset of the tenancy. Therefore, you should instruct a Gas Safety Engineer to conduct a gas safety check and then provide the tenants with the updated certificate. This must be repeated annually.
• A deposit protected in a government-approved scheme.
• A copy of the guide outlined above.
• An Energy Performance Certificate with a minimum rating of ‘E.’
• A report that shows the working condition of the property’s electrical installations – Fixed electrical parts must be inspected every five years, and throughout the entirety of the tenancy, national electrical safety standards must be satisfied.
• Evidence that carbon monoxide and smoke alarms are in working order.

Your obligations do not stop here. You have an ongoing duty to maintain the structure of the property, deal with any issues stemming from the utilities and carry out any reasonable repairs when requested.

Remember, it is all in your best interests to do so if you would like to build, or even sustain, strong relationships with your tenants in situ.