Selling with sitting tenants — investor sale route
- Investor buyer only: a tenanted property cannot be sold to owner-occupiers or most first-time buyers — mortgage lenders will not offer residential mortgages on occupied investment property
- Tenanted property discount: typically 10-20% below vacant possession market value — varies with rent vs market, tenant payment history, remaining fixed term, property condition
- Advantages: property generates rental income throughout conveyancing; no void period costs; no possession proceedings required; tenant has security
- Tenancy passes automatically: the tenancy passes to the new owner at completion under the Property Act 1925 — no formal assignment required
- Deposit transfer obligation: outgoing landlord must transfer the tenancy deposit to the incoming landlord and notify the deposit scheme — if not done correctly, incoming landlord may face liability
Ground 1A — 12-month restriction
Ground 1A (selling with vacant possession under RRA 2025) cannot be used within the first 12 months of a tenancy. Landlords who want to sell a recently let property must either wait until 12 months have elapsed, negotiate a voluntary surrender, or sell with the tenant in situ to an investor buyer.
Obtaining vacant possession under RRA 2025
- Section 21 abolished from 1 May 2026 — no more no-fault eviction notices for any tenancy in England
- Ground 1A (new): sell with vacant possession — 4 months' notice, mandatory ground, cannot be used in first 12 months; landlord must not let the property again within 3 months of completing the sale
- Ground 1: landlord/family member to occupy as only or principal home — 4 months' notice, mandatory
- Cash for keys: negotiate voluntary surrender with cash incentive, extended notice, or housing assistance — quicker and cheaper than court proceedings where tenant agrees
- Timeline: from Ground 1A notice to vacant possession typically 6-12 months if contested — 4 months' notice + court proceedings if tenant does not leave
Disclosure obligations and tax on sale
- TA6 property information form: disclose tenancy details, rent, deposit, any disputes, possession proceedings history, building safety issues (cladding, EWS1)
- Tenancy documentation pack: provide AST, check-in inventory, gas safety certificate, EPC, EICR, How to Rent guide, deposit protection certificate to buyer's solicitors
- Rent arrears disclosure: any arrears must be disclosed — contract should specify how arrears are treated at completion
- CGT on disposal: 18%/24% on the gain; report and pay within 60 days of completion via HMRC UK Property Reporting Service; PRR unlikely to apply to pure buy-to-let
- SDLT for buyer: investor buyers with other properties pay 3% additional dwellings surcharge on top of standard residential SDLT rates — a high SDLT cost may affect the price the buyer is willing to pay