Buying a house with tenants in-situ?

[Wondersense]

Does anyone have any experience of this? I'm a first time buyer and thinking of putting in an offer for a house that currently is occupied by tenants, who are friends of the landlord. The tenants have already been given notice, which is 6 months, but I think that was only recent so they still have at least 5 months to go.

Does anyone have any experience with this? How different is it to being in a chain? There are websites online that cover something like this, but all the ones I've found so far are aimed at landlords who are buying a house with tenants already in them, not an average buyer who will want to live in that house themselves.

I'm concerned because if they don't find somewhere to live within 6 months and refuse to move for some reason, that will leave me without a house. The busiest time of year in terms of listings is coming up, and I don't want to miss out as I've been looking for a house for a while now. Normally, I wouldn't consider it, but it's a cozy home in a decent street, in the town I want where the volume of homes that come on the market is very low.

I would say you'll buy it but you'll need tenants out of the house before you can.
Do you know what sort of tenancy they have? If they have been given notice they have to be out & if you don't have that reassurance I don't see how you can commit to anything

I sold a flat with a tenant, of course on condition she moves out before exchange. she was served s21 and moved out. All went smoothly. My buyers got their mortgage fine.

The issue in this case is the tenants aren't due to move out for 6 months so unless the sale takes over 6 months they will still be there when @Wondersense becomes the owner.

Not quite. The OP won’t be the owner in six months if the tenants are still in situ because exchange won’t have taken place.

True.

I would absolutely take a swipe at this one for sure - just because the current owner has given them notice doesn’t mean anything- especially as they are friends too.
Advise solicitor and EA that until the tenants have vacated that you don’t wish to go ahead - and keep looking for other properties.

6 months isn't ideal obviously, but plenty of "normal" house moves take that long or longer. Buying a new build will often mean a wait of that length or more.

Do not exchange contracts until the landlords confirm the house is now vacant. It would be very foolish and naive to exchange contracts trusting that the place will be vacant come completion day. Tbh you are probably best off finding a different place to buy and the vendors will be better off if they sell to another landlord, but if you are both willing to proceed you will have to wait until the tenants leave before you can proceed. Your mortgage OIP may expire before then of course.

Essentially you will not be able to purchase the property for 6 months (assuming tenants find a new property to move to at that point).
So the owner is also stuck and won’t get his cash until then.

Unless a new buyer comes along, either as a cash purchaser and doesn’t require a mortgage, or is looking for a rental property so has a buy to let mortgage.
In which case the owner is likely to then dismiss your offer and go for the new buyer as they can complete more quickly.

You are taking on a lot of risk here and might lose out on a better property. No harm in telling the agents you’re interested but also keep your options open and keep looking at what else is coming on the market.

I definitely wouldn’t be spending any money on this property @Wondersense

If it’s still for sale in a few months time & you’re still looking then maybe make an offer at that stage but not yet. And the property will have to be empty by exchange of contracts as previously mentioned.

I’d be very cautious. If the tenants don’t vacate, it can be a long process to go through. I wouldn’t potentially waste money starting searches and getting a survey.

We put and offer in on our house with tenants in situ. We also had no issues with securing our mortgage, the only difference to the process was that the solicitor did not exchange until the property was confirmed to be empty. Had it not been empty we would not have been able to proceed with our mortgage/ exchange.

The only thing is that a 6 month period is quite a long time (ours was only 3 and they were out within a month) and if they are friends of the landlords I would be concerned that if they struggle to find somewhere, would the landlords pull out of the sale etc? I think could be more hassle than it's worth tbh.

Yes it’s the 6 month notice period that is the sticking point not having tenants in situ, which is quite common in London for example.

It’s not normal to buy a property knowing that the tenants have the right to be there for at least 6 months. People don’t normally put their properties on the market until notice has been served and the tenant is due to leave in a month or two. Unless the property is marketed as “cash buyers only” which indicates they expect another landlord to buy it who doesn’t need a mortgage.

We are the tenants in this situation with similar notice as we have a fixed term contract with no break clause. I would avoid. They may struggle to find somewhere and need to be evicted via court.

I marketed a flat with tenants in situ. They had 4 months left on a 2 year contract and gave me a heads up that they would not be renewing so effectively they gave me notice. I checked with them and they were happy to accommodate viewings during the last few months of their tenancy.
Sale was agreed during that period but exchange could not take place until they vacated. My buyer needed a mortgage and the offer was issued subject to vacant possession.
If the tenants hadn’t been happy I would have waited until they moved out to put the flat on the market.

My brother was renting a small property in the garden of the owner/occupier who was selling up.

He had to be physically out of the property before the buyers would exchange/complete (sorry I’ve forgotten which it was).

I know this because he turned up on my doorstep asking to move in with me temporarily because he had only 13 days left before he had to move out!

I would want to talk to the tenants face to face to learn what their plans are, ask to see the contract (if any) between them and the landlord.

Learn all you can about what how the tenants in situ system works and find out what the worst case scenario is.

It looks as if this is about the only thing you have seen that you can afford and it may be that the tenants in situ are the reason the price is affordable. A lot of people will be put off.

can you negotiate any price reduction if the tenants don’t move out in 6 months. If the landlord if happy to do this, it will show you that he believes they will move out in time.

As you are a first time buyer and not in a chain, do you have the option to stay where you are if it drags out?

There’s always a risk, but the more you know and find out, the more you will be able to mitigate those risks.

Normally, I think I would walk away, but if there were reasons the house would be perfect for me, I would check very carefully that I wasn’t missing a golden opportunity.

So I guess I’m saying don’t give up just yet, keep digging until you find out more.

It's a no.

Yes I have, as an investment though so took over their lease.
Whatever you do, DO NOT EXCHANGE UNTIL VACANT.

@PeanutCat1 Yes I think that's going to make it more complicated. If they are thinking of renting, and if they're on a low or unstable income (which I have a suspicion they may be), then it's going to be really difficult for them to find somewhere that quiet and cozy in that time period. And if so, they may refuse to leave or their friend may just pull back from selling.

If the estate agent calls again, I'll them them know again that I'm very interested in making an offer, but only once it's been officially vacated.

@Iamnotawinp It's definitely not my dream property. I couldn't afford that on my budget anyway, but it's on a quietish street that is not a shit hole, and in terms of transport links it's not too bad. Very properties come on the market in that town, and those that do are usually well outside my price range. That's why I'm considering it.

I don't think anyone else is interested in the house. I might put in an offer and just say it's conditional on vacant possession, at which point I will do another viewing, the if I'm happy, I'll apply for a mortgage and start spending money on a survey and searches. I will specify that at this point it needs to come off the market and the estate agents need to stop viewings, because I'm not having a situation where I go through all of that only to be gazumped by another interested party who's willing to offer more.

Your issue is that unless you're a cash buyer, you'll either want a residential mortgage or a buy-to-let mortgage, and neither will suit these plans. You'll also pay more for a buy-to-let mortgage and they're subject to different rules and borrowing calculations. You can get consent to let on a residential mortgage, but not right from the start. If you mislead the mortgage company, it's fraud AND any insurance you have on the property will be invalidated.

I do get how difficult housing is, and getting worse. Whatever you do, do not stop looking for your property.

As others have pointed out, you can't exchange contracts until they can confirm vacant possession. As well as the problems others have pointed out upthread, once the landlords can confirm vacant possession and the reason it has been valued on the low side disappears, what would stop the vendor putting it back on the market at a higher price? Why wouldn't they want the best price they can find?

Sorry.

@FinallyHere once the landlords can confirm vacant possession and the reason it has been valued on the low side disappears, what would stop the vendor putting it back on the market at a higher price

Indeed. That's why I'm not going to stop looking. My only strength is that I'm a first time buyer and in a fast buying position. There might be others out there, but there are other reasons why a lot of other buyers wouldn't be interested in this house. Their pool of potential buyers is very slim because of those reasons.

I sold a property when a friend was renting it.
My friend was asked to sign the contract stating they would vacate the property. They moved out a few weeks before exchange.

I think they are more likely to leave as they wouldn't want to fall out with a friend. Compared to a tenant/ LL relationship.

It's hard because the house owner won't want it sitting empty for months waiting for a buyer. Could you ask more about the situation to give yourself more confidence?

If you are buying it to live in then give it a swerve.