If you’re searching for a property to buy, you may come across terms like ‘tenant in situ’ or ‘sitting tenant.’ But what do they actually mean? In this guide, we’ll break down what a sitting tenant is, the advantages and potential risks of buying a tenanted property, and key factors to consider before investing. By the end, you’ll have the knowledge to make an informed decision about purchasing a property with tenants in situ.
What Is a Tenant in Situ (Sitting Tenant)?
A tenant in situ, also known as a sitting tenant, is a renter who remains in the property even after it is sold to a new owner. In other words, when you buy the property, you inherit the existing tenants along with it.
Many landlords choose to sell with tenants in situ for various reasons. Some have a good relationship with their tenants and prefer not to evict them, while others may be unable to remove them due to tenancy agreements. For instance, if a property is sold during a fixed-term tenancy, the tenant has the right to stay until the contract ends.
Why Consider Buying a Property with Tenants in Situ?
Purchasing a property with sitting tenants comes with several advantages, especially for landlords looking for a hassle-free investment. Here’s why it might be a smart move:
Lower Purchase Price
Properties with tenants in situ often sell for a lower price because they can be harder to finance with a traditional mortgage. While some lenders may be cautious, you can still find financing options—it just might take more effort. That said, the lower price makes these properties particularly attractive to cash buyers who can bypass mortgage restrictions and secure a great deal below market value.
Immediate Rental Income
One of the biggest benefits of buying a tenanted property is that you start earning rental income from day one. Since the tenant is already in place, you won’t experience the usual void period between ownership and finding a renter. This can provide steady cash flow from the moment you take ownership.
No Need to Find a Tenant
Finding reliable tenants takes time and effort—not to mention the costs involved in advertising, conducting viewings, and handling paperwork. With a sitting tenant, all of this is already taken care of, saving you time and reducing upfront expenses.
Property Likely in Rentable Condition
Rental properties are typically refreshed between tenancies, meaning they might need new paint, repairs, or upgrades before being listed again. However, when you buy with tenants in situ, it’s likely that the property is already in a liveable and rentable condition, reducing the need for immediate refurbishment.
What Are the Risks of Buying a Property with Tenants in Situ?
While purchasing a property with sitting tenants has its advantages, there are also potential challenges to consider. Here are some key risks to keep in mind:
Financing Can Be More Difficult
Many lenders view properties with tenants in situ as a higher risk, which can make securing a mortgage more challenging. You may need to find a specialist lender or work with a broker to secure financing. In some cases, lenders may require a larger deposit, making the upfront investment higher than expected.
Potential Hidden Issues
Some landlords choose to sell with a sitting tenant because they want a quick sale. While this isn’t always a red flag, it could mean there are underlying issues—whether with the property itself or the tenant. Unexpected maintenance costs or tenancy disputes could arise after you take ownership, so due diligence is essential.
You Inherit the Tenant—Good or Bad
When buying a property with a tenant in situ, you don’t get to choose the renter. They may not align with your expectations or rental strategy. Whether it’s payment history, upkeep habits, or communication style, an existing tenant might not be the right fit for your investment approach.
Eviction Can Be Costly and Complex
If you decide you no longer want the tenant in place, removing them can be difficult, especially if they have a long-term or protected tenancy. Legal eviction processes can be time-consuming and expensive, so it’s crucial to review the terms of the tenancy agreement before committing to the purchase.
Key Things to Check Before Buying a Property with Tenants in Situ
Buying a property with tenants in situ requires extra due diligence compared to purchasing a vacant home. Since you’re inheriting an existing tenancy, you need to ensure that everything is in order to avoid legal or financial issues down the line. Here are the key factors to verify before proceeding with your purchase:
Tenancy Agreement Details
Check the type of tenancy agreement in place and how long is left on the contract. If it’s a long-term tenancy, you’ll be legally required to honor its terms. If the agreement is ending soon, you may have the option to renegotiate or request vacant possession.
Tenant’s Rental History
Find out whether the tenant has a history of paying rent on time. Review rental payment records or bank statements to confirm consistent payments. If the tenant has a history of arrears, it could pose a risk to your investment.
Deposit Protection Scheme
Confirm that the tenant’s deposit is registered in a government-approved deposit protection scheme. If not, the seller may be in breach of tenancy laws, which could become your problem after the sale.
Verbal Agreements Between the Landlord and Tenant
Ask the tenant if there are any off-the-record agreements, such as reduced rent in exchange for property maintenance or cash payments not reflected in the tenancy agreement. These could impact your rental income or lead to disputes later on.
Rent Amount and Payment Method
Verify the exact rent amount and who is responsible for making payments. In some cases, a third party (such as a family member or housing support) may be paying on behalf of the tenant. Ensure that the figures provided by the seller match what the tenant states.
Property Condition and Inventory
Request a copy of the property inventory to confirm what is included in the sale. If the property is furnished, ensure that all items comply with safety regulations. Conduct a thorough inspection to check for maintenance issues that could become your responsibility.
Tenant Communication and Expectations
Before finalizing the purchase, speak with the tenant to understand their expectations and ensure a smooth transition. Some tenants may be worried about potential changes, so clear communication can help prevent future misunderstandings.
Legal Compliance and Safety Certificates
Ensure that the property complies with rental regulations, including:
- A valid Energy Performance Certificate (EPC).
- A recent gas safety certificate (renewed annually).
- An Electrical Installation Condition Report (EICR) confirming safe wiring.
- Fire and carbon monoxide safety measures, such as smoke detectors and CO alarms.
Local Rental Restrictions
Check whether there are any local restrictions affecting your ability to let the property. For example, some areas limit new Houses in Multiple Occupation (HMOs), which could impact your investment strategy.
The Landlord’s Reason for Selling
While not always a red flag, it’s worth understanding why the current landlord is selling. Are they exiting the buy-to-let market, or is there an issue with the tenant or property? A little research can save you from unexpected complications.
What Next: Buying a Property with Tenants in Situ
A property with tenants in situ can be a smart investment, but only if you’re well-informed and take the right steps. From understanding tenancy agreements to ensuring compliance with rental regulations, there are key factors to consider before making a purchase.
If you’re unsure about navigating the process or want to negotiate the best deal, expert guidance can make all the difference. Book a free discovery call today and get the support you need to make a confident and profitable investment.
