Buying with tenants in situ: 20 questions you need to ask

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Changes to buy-to-let taxation and legislation could mean a rise in properties on the market with a tenant and tenancy agreement already in place. 

It can be advantageous to buy a property with tenants in situ. As well as enjoying a potential income stream from day one, you can avoid the costs of marketing the property and vetting new tenants.

Investors need to fully investigate the current AST before buying the property

But you are also entertaining a degree of uncertainty. Are you taking on good tenants? Did the previous landlord keep his or her house in order? Are there any outstanding disputes which may already have reached the point of litigation?

For this reason, many landlords like to start with a blank slate. This lets them examine the property, choose the tenants themselves and oversee the agreement from the outset.

If you are buying a property with tenants in situ, asking the following questions can help to minimise any risk.

Questions to ask about the tenants in situ

Bear in mind that this list is neither inclusive nor exhaustive. Not all questions will be relevant in all cases, and there will always be concerns that the list does not address.

As you progress in your business, you will get a feel for what you need to know to make an informed decision. You should adapt and add to this list as you see fit.

1. How long have the tenants been at the property?

2. Have the tenants ever been, or are they currently, in rent arrears?

3. What references and checks were taken for the tenants?

4. Do the tenants have rent guarantors? If so, what references and checks were taken for them?

5. Are there any ongoing disputes with neighbours regarding antisocial behaviour?

6. Does the current landlord expect to deduct costs from the tenants for damages to the property or its contents?

Consumer protection legislation prohibits vendors from giving false information or making misleading omissions. But you might still wish to ask for evidence in the form of rent books, guarantor forms, letters of complaint etc.

If you are able, you might also wish to speak to the tenants themselves. Remember that they have the right to quiet enjoyment of the property, so you will need their permission as well as the current owner’s to enter.

Read more Four tenants’ rights every landlord should know

Questions to ask about the property

It is harder to analyse the condition of a property with tenants in situ. The presence of personal belongings and the tenants’ right to privacy make a thorough examination difficult. To better determine the property’s condition, ask the vendor the following questions:

7. When was the boiler last serviced, and how old is it?

8. Has the owner ever made any insurance claims against the property?

9. Are there any outstanding repairs or tenant requests that require attention?

10. Has the property ever been treated for damp?

11. Is there a history of pest infestation at the property?

Where possible, request evidence in the form of relevant certificates, invoices and warranties. If you do get a chance speak to the current tenants, you may wish to ask for their appraisal of the property and any problems they have experienced.

Questions to ask about the tenancy agreement

12. What type of tenancy agreement is in place?

13. How long is left on the current tenancy agreement?

14. Was the tenancy agreement drafted by a reputable law firm (and are there any associated copyright issues?)

Tenancy agreements drafted by law firms might be more clear in delineating the landlords’ and tenants’ rights and responsibilities. Often, though, law firms retain a copyright over documents they produce, which means that you won’t be able to reproduce the agreement.

The type and duration of the tenancy agreement are very important details. There is a chance that the tenancy in place predates the Housing Act 1988, making it a regulated tenancy. Regulated (or ‘sitting’) tenants pay below-market rents and are more difficult to evict than assured shorthold tenants.

Questions to ask about the management of the property

15. Has a letting or managing agent been managing the property?

If yes:

16. Have they done a good job of managing the property?

17. Are they accredited, and if so, by what professional body?

18. How much do they charge for their management service?

Any pre-existing management contract is between the agent and the current landlord. You are under no obligation to continue instructing them once the property is yours.

Regardless of who manages the property, there are a number of documents you will need in order to fulfil your obligations as a landlord. These include:

Questions to ask about the tenancy deposit

If you buy a property with tenants in situ, all of the previous landlord’s obligations become yours. This includes the statutory obligation to place any security deposit in a government-approved deposit protection scheme.

Failure to protect a tenancy deposit in the correct manner can prejudice a section 21 eviction notice. It also gives the tenants the opportunity to claim up to three times the deposit amount.

19. Did you take a security deposit from your tenant?

20. If so, did you protect the deposit and issue the prescribed information?

After protecting a deposit, a landlord or agent must provide their tenant with prescribed information. The previous landlord should have done this within 30 days of taking the deposit.

Always request proof that the deposit was protected and the prescribed information issued. If the previous landlord did not protect the deposit, you should seek to recover it and protect it as soon as you are able. For the avoidance of doubt, you might even wish to return the deposit to the tenant.

Mortgages for buy-to-let properties properties with tenants in situ

The majority of buy-to-let lenders will consider applications for properties with tenants in situ (subject to other criteria). They may require that the applicant signs a new AST agreement with the tenant.

You need to understand how the current rent being paid will impact on the available loan size. By talking to us you can quickly learn which mortgage products might be the best fit in terms of rate and repayments. This will save you time when it comes to making your mortgage application. 

Note that lenders will not always accept the rent that the tenants in situ are currently paying. Some will base their offer on a rental valuation, as is typical for an unoccupied property.

For assistance with your next buy-to-let mortgage application, call us on the number at the top of the screen or click the link below.

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This information should not be interpreted as financial advice. Buy to let mortgage rates are subject to change. Speak to our advisors for a mortgage illustration.

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