How Much Does a Sitting Tenant Devalue a Property? A Brief Guide

The process of selling a home can be a big undertaking for most homeowners. For landlords, however, who are looking to sell a tenanted property, the procedure can be a little more complex. Indeed, the more parties involved in a transaction, the greater the chance of problems arising.

One issue many landlords encounter when selling a tenanted property, is getting a lesser return on their investment. When starting the selling process, many landlords ask: how much does a sitting tenant devalue a property?

We have pulled together the following blog, using external sources to answer this question. We will clarify some of the finer details around the rights that both landlords and tenants have when buying or selling a tenanted property. But first, let’s define what a sitting tenant is.

What is a sitting tenant?

A sitting tenant is an individual(s) living in a property that a landlord is currently renting out. Selling the property, while it’s still occupied with tenants, is known as selling with sitting tenants.

If successful, the sale would see the tenants remain in the property with the new buyer as their landlord. Sometimes, sitting tenants are also referred to as ‘tenants in situ’.

Though they are rare these days, landlords may also come across lifetime sitting tenants. These tenants have the legal right to live in the property until they die. Usually, they live in houses that have been sold by the government or local council to a private landlord.

What rights do sitting tenants have?

When selling or buying a tenanted property, it’s important to be aware of the tenants’ rights. There is legislation specifically designed to protect sitting tenants. So, on top of questioning how much does a sitting tenant devalue a property, what else do landlords need to consider?

For starters, landlords can’t evict a sitting tenant unless the tenants break the terms of their existing tenancy agreement (with the exception of Section 21 evictions[1]). This tenancy agreement comes with the property as part of the sale. There is no legal obligation for a sitting tenant to sign a new rental agreement if being offered one.

As such, whatever agreement or contract the tenant had with the outgoing landlord, must be adhered to by the incoming buyer. This gives sitting tenants the right to stay in the property until their tenancy ends, unless they breach the terms involved.

Some tenants who have had a tenancy agreement in place since before January 1989[2], will have more comprehensive rights. These tenancies are referred to as assured or regulated. They might even allow the tenant to remain in the property indefinitely.

Once an agreement has been made to sell the property, it’s advisable for the outgoing landlord to inform their tenants promptly of the changes. Additionally, the new landlord must advise the tenant on how the change will affect how they pay rent (e.g. who and where to pay).

Some landlords might consider offering to sell the property to the sitting tenant before looking for alternative buyers. However, there is no legal obligation for landlords to do so.

What rights do landlords have?

The Renters’ Rights Bill is set to come into force from Autumn 2025, and it will bring with it major changes for landlords. Chief among them is the abolition of section 21 evictions. Landlords will no longer be able to serve “no-fault” evictions to regain possession of their properties[3].

Due to this abolition, section 8 possession grounds will be expanded and updated. The changes here will enable landlords to regain possession for valid reasons that include rent arrears (ground 8 and 10), and redevelopment (ground 6[4]).

Other changes that the Renters’ Rights Bill will introduce includes:

• The abolishing of fixed-term assured shorthold tenancies (ASTs)
• The limiting of rent increases
• The banning of rental bidding wars
• The application of a Decent Home Standard, and more

Under the current, pre-bill rules, landlords can still exercise certain rights that will soon be abolished. This includes serving section 21 evictions, and refusing pets. Following a sale, the new landlord may want the sitting tenants to sign a new tenancy agreement, but they are not legally obliged to do so[5].

The new landlord should also provide the tenant(s) with their name, address, and the date they became the legal owners of the home within 2 months of the purchase. Also, trying to force a tenant to leave after a sale is illegal.

What to look out for when buying a property with a sitting tenant

There are some benefits to buying a property that is already tenanted. For instance, it can provide the new landlord with immediate rental income. What’s more, they may also inherit respectful, long-standing, and trustworthy tenants.

That said, there are some things that incoming landlords should look out for before buying a property with a sitting tenant. The condition of the property may not be to preferred standards. Additionally, the building may not comply with the necessary safety or building regulations.

These are not issues necessarily created by the tenant. However, any renovations or refurbishments needed may be difficult to carry out with sitting tenants. Additionally, it is good to know whether the sitting tenants are reliable. This would involve checking whether the tenants have a good history of paying their rent, or if there are any points of conflict between the tenants and the outgoing landlord.

Selling a property with a sitting tenant

Selling a property with a sitting tenant can potentially have a higher level of complexity. That’s why it may be more difficult to sell a property with a setting tenant than a vacant property. Landlords must tell their tenants in advance if they are going to sell their property. They also need to give them at least 24 hours’ notice before every visit or inspection[6].

Naturally, tenants will be concerned about the risk of being evicted by the new buyer. So, sellers could also make their tenants aware of their rights when they give them notice. They should also clearly outline how their security deposits will be passed onto the buyer, who will need to ensure it remains protected after the sale[7].

Landlords generally have three options when it comes to selling their tenanted property(s):

1. Through an estate agent
2. At auction
3. To a home buying company.

If a landlord sells through an estate agent – ideally one that has experience in selling tenanted properties – a fair asking price can be set by the agent. They’ll handle the sale independently. In most cases, it can take around 4 months for a sale to go through[8].

At an auction, landlords are more likely to find buy-to-let investors who are looking to build their portfolios quickly. Indeed, auctions can provide quick sales within 28 days or sometimes even less. But the property could also sell for less than the landlord might have initially hoped.

Similarly, while a home buying company will complete a purchase at speed, they often buy property at a reduced price. However, landlords will often be able to forego some of the other costs associated with a sale such as an estate agent fee.

How much does a sitting tenant devalue a property?

Even when selling a vacant property, there are many variables that can impact the value of a property. But a sitting tenant can devalue a property’s sale price.

If there is a shortage of other buy-to-let landlords in an area, for example, sellers might struggle to find a suitable buyer. While the type of tenancy agreement in place can also have an impact as well.

Generally, a property with sitting tenants can sell for 20% to 40% less than a vacant one[9].

Final thoughts

A sitting tenant can potentially devalue a property. But landlords can potentially take advantage of a reduced purchase price. They would do well to arm themselves with a reliable broker and – should they need extra capital to finance a property purchase – an experienced lender who can provide the flexible financial products that best suit their needs.

With almost 20 years of experience, and a growing range of financial products for buy-to-let landlords and investors, Market Financial Solutions is on hand to assist with taking on a tenanted property investment opportunity.