Purchase Freehold Without Vacant Possession
When you buy or sell a freehold property in the UK, the term ‘vacant possession’ or the lack of it, is used in contracts to illustrate the status of the property on completion day.
It is important to enquire before finalising the purchase whether the property is sold with or without vacant possession. Currently, it is not unusual to purchase a freehold without vacant possession. Buying a property with a sitting tenant has multiple distinct advantages, for instance, offering income from the get-go.
Purchase Freehold Without Vacant Possession
Simply put, when a buyer acquires property with a tenant in situ, it means that the property is sold without vacant possession. The tenant currently renting the property will continue to remain in place even when the property is sold and ownership is transferred to a new buyer.
Some landlords sell freehold without vacant possession because of their good relationship with the tenant. In other cases, the new owner cannot evict a tenant in occupation due to the tenancy agreement.
Despite the change of ownership, the tenancy will continue as it did and both parties are bound to comply with the terms of the tenancy agreement in place.
In the buy-to-let market, it is quite common to invest in a tenanted property to save costs and start earning income right away. However, a landlord would have a hard time selling a property without vacant possession and may have to take a below-market valuation.
Things to Consider When Purchasing a Freehold Without Vacant Possession
Purchasing a freehold without vacant possession is a bit complicated, therefore, seek assistance from an experienced conveyancing solicitor. Besides, a tenant can perform additional checks to verify before the purchase.
- Licensing – Although it is not mandatory for all property types, some residential properties, especially, HMOs, should be licenced. Verify whether the property needs to be licenced, if so, request details from the landlord.
- Rights of the Tenant – Verify the rights of the tenant and the form of tenure. Check if the tenant occupies the property under the assured shorthold tenancy agreement or a periodic tenancy. If the tenant occupies the property via the aforementioned agreement, it is possible to evict a tenant under special circumstances. It would be difficult to start eviction proceedings for tenants occupying a property under a protected tenancy.
- Legal Requirements – Make sure that the seller provides you with an Electrical Installation Condition Report (EICR), valid EPC, and an annual Gas Safety certificate. Moreover, appropriate fire safety measures are put in place, for instance, fire alarms, smoke detectors, etc.
- Overall Property Condition – Hire an experienced professional to evaluate the property conditions and if it requires any major repairs.
- Deposits – Before purchasing the property, discuss arrangements with the seller about the transfer of deposit. Ensure that the tenant’s deposit is registered and placed in an approved depository scheme.
- Profitability – The return on investment or the rental yield is an important consideration before buying a tenanted property.
Purchasing a Property Without Possession
- Viewing – Arrange a viewing to get a good idea about the property conditions and the potential problems. Give tenants a notice at least 24 hours before the viewing.
- Take Feedback From Tenants – Have an informal chat with the tenants about what improvements they would like, rent increments, and similar things.
- Tenancy Agreements – Along with the seller and the solicitor, review tenancy agreements to verify the terms of the contracts, length of the tenancy, and the status of the tenants and deposit.
- Deposit – The solicitor normally deals with the transfer of deposit and notifies the deposit scheme of the change of ownership.
- Completion – Both parties should agree on a completion date to finalise the purchase. After the exchange of contract and payment of funds, the sitting tenant should be informed about the change of ownership by serving a Section 48 notice.
