What Is a Sitting Tenant?

When it comes to selling or buying a property as a landlord, there are various factors that can influence potential market value and desirability. One such factor is the presence of a sitting tenant. In this brief guide, the experts at Percy Hughes & Roberts Solicitors explain what a sitting tenant is, what legal rights they have, and how their presence can devalue a property.

If you are a landlord, you may have come across the terms “sitting tenant” or “tenant in situ” and wondered about their implications. With soaring house prices in the UK, many people are looking to rent properties on a long-term basis, meaning the likelihood of encountering a sitting tenant as a landlord has increased.

In this guide, we will explore the concept of sitting tenants, discuss their rights, and how they can impact the value of a property. Whether you are a landlord navigating the sale of a property or a buyer considering purchasing a property with a sitting tenant, we hope this guide will provide you with valuable insights to help you make informed choices.

If you have any questions we have not covered, our specialist landlord solicitors are able to answer your query and provide the legal services landlords need. You can contact us by completing the enquiry form below or by calling 0151 666 9090.

What is a “sitting tenant”?

A sitting tenant is an individual who rents and occupies a property that is being sold by a landlord. The term refers to a tenant who remains in the property throughout the sale process, maintaining their tenancy even after the property changes ownership between landlords.

If the decision to sell the property happens during the fixed term of a tenancy agreement, or the tenancy is protected, the sitting tenant has the right to continue to live in the property once the property has been sold.

What is a “tenant in situ”?

A “tenant in situ” is simply another name for a “sitting tenant”. The two terms are now used interchangeably.

What legal rights do sitting tenants have?

Sitting tenants have certain legal rights that protect their tenancy, even when it is sold or transferred to a new landlord. The specific rights can vary depending on the type of tenancy agreement. Here are some common legal rights that sitting tenants may have:

Right to remain in the property

A sitting tenant has the right to continue living in the property until their tenancy agreement ends or they are evicted for good cause. This right ensures that the tenant's occupancy is not disrupted due to the change in ownership. There are several legal grounds to evict tenants during a fixed-term tenancy, and you can find more information about this in our guide to serving an eviction notice.

Right to fair rent

Sitting tenants have the same right to fair rent as any other tenant. Landlords can only increase rent when an existing tenancy agreement ends, or if the agreement has a rent review clause, meaning that in most cases, the new owner of the property will have to charge the same rent as the previous landlord. Rent increases have to be fair and reasonable.

If the tenancy was taken before 1989, this is a Regulated Tenancy, and the tenant will have more legal rights. They have a right to review of fair rent every two years, and this will be carried out by a rent officer rather than a landlord.

Protection against eviction

While landlords have the right to regain possession of their property under certain circumstances, sitting tenants are generally protected against unjust evictions. Evictions must follow legal procedures, and landlords must provide valid grounds for eviction, such as non-payment of rent or breach of tenancy terms.

Right to notice

If a landlord intends to evict a tenant in situ, they must provide sufficient notice as required by local tenancy laws. The notice period may vary depending on the type of tenancy and the reason for eviction.

Do sitting tenants still pay rent?

Yes, tenants in situ are still required to pay rent during the sale process. If a tenant stops paying rent, landlords can start the process of evicting the tenant under Section 8 of the Housing Act 1988.

Landlords will need to consider that in order to issue a Section 8 notice on the grounds of non-payment of rent, tenants will need to be in arrears of at least:

• eight weeks’ rent if paid weekly or fortnightly
• two months’ rent if paid monthly
• three months’ rent if paid quarterly or annually

There are other legal grounds you can use to evict tenants, although you will often have fewer options when you purchase a property with existing tenants. The original assured shorthold tenancy (AST) agreement may contain provisions that outline how you should deal with tenants in situ, so you should ask to review this during the buying process.

What happens with the tenancy agreement for sitting tenants?

The most common scenarios tenants face with their tenancy agreement when their rented property is sold are:

No change

When a rental property is sold to another landlord, this does not always mean a new tenancy agreement. There is no requirement to sign a new tenancy agreement, especially if the new landlord is happy with the terms of the existing contract. The tenancy will continue with little to no change, other than the new landlord.

New tenancy agreement

The incoming landlord may wish to change certain terms in the existing tenancy agreement. Changes may include altering the duration of the tenancy or the amount of rent the tenant is expected to pay (though certain restrictions apply here, as mentioned above).

Often, tenancy agreements are renewed to simply acknowledge the transfer of ownership. Any changes must uphold the sitting tenant's rights, so it is vital to consult a legal professional to advise you before you make changes to an assured shorthold tenancy agreement.

Deposit protection

If a tenancy deposit was collected from the tenant by the previous landlord, the new landlord is responsible for transferring the deposit and complying with the relevant deposit protection scheme requirements. The tenant should be informed about the transfer of the deposit and any steps they need to take.

Can sitting tenants be evicted?

The eviction of sitting tenants can be a complex and delicate legal matter. The short answer is that yes, it is usually possible to evict a sitting tenant, providing all of the correct procedures are followed for a lawful eviction.

Having said this, the ability to evict a sitting tenant depends on various factors, including the type of tenancy agreement in place and the specific circumstances surrounding the eviction. For example, it depends on whether the tenants have an assured or regulated tenancy agreement in place.

Generally speaking, if the tenancy is an AST and the fixed term has expired, the landlord can use a Section 21 notice to evict the tenant. This also applies to a periodic tenancy/rolling contract.

Things become a little more complicated if the tenant has been in the property since before 1989. These tenants are entitled to security of tenure under a regulated tenancy and their tenancy rights are more comprehensive than an AST.

As most regulated tenancies were agreed before January 1989, they won’t apply to the majority of contracts in place today. If this applies to your particular case, however, we advise getting in touch with our expert landlord solicitors to discuss your options.

Can I sell a property with a sitting tenant?

Yes, it is possible to sell a property with a sitting tenant. When a property is sold with a sitting tenant, the tenant currently residing in the property can continue to live there even after the ownership of the property changes hands.

However, it is important to note that selling a property with sitting tenants can present some challenges. For instance, some potential buyers may be hesitant to purchase a property with an existing tenant, as it limits their options for immediate occupancy or personal use of the property.

Additionally, certain lenders may be reluctant to provide mortgages for properties with sitting tenants, which can further limit the pool of potential buyers.

It is advisable for landlords looking to sell a property with a sitting tenant to seek professional advice from estate agents and solicitors who specialise in these transactions.

Does a sitting tenant devalue a property?

Unfortunately, tenants in situ can devalue a property. Generally, properties with sitting tenants tend to sell for lower prices compared to properties that are vacant. There are several factors that contribute to this potential drop in the market value of the property:

• Limited buyer pool
• Financing challenges
• Rent restrictions
• Tenant's rights and lease terms

The home insurance firm My Urban Jungle estimates that selling a property with a sitting tenant under a temporary tenancy agreement, like assured shorthold tenancies or periodic tenancies, could devalue a property between 20-25% compared to a vacant property.

If the sitting tenant is under an assured tenancy and will not leave the property, this could rise to as much as a 30-40% fall in the value of the property.

It is also important to note that these figures are estimates and can vary depending on factors such as the property's location and the current market conditions. Local market dynamics can play a significant role, and it is possible that strong demand from prospective landlords in the area could mitigate the devaluation impact. As a property owner, it is important to consider all of the available options when selling a property.