Hi all,
I thought I would ask the collective on here as someone has experience with these type of situations.
I have a property that is currently being rented out and I have been toying with the idea of selling it for a few years now but procrastination is my forte. Anyway to cut a long story short, with the tax changes tapering in for the last few years, and myself being a high rate tax payer, its now actually losing me money (the property is set up in my name not as a ltd company). I currently have sitting tenants.
Question is can I sell the property whilst it has tenants?
Thanks
Is it actually losing money when you look at long term property appreciation? We're in a bit of a wobble at the moment but short of a very radical left wing government or an epidemic orders of magnitude worse than the one we are in property values are are only going in one direction.
The short answer is yes, of course, but it will limit the amount of people who will be interested in it.
A buy to let investor who would be renting it out anyway would likely still be interested, but the legals are a little more complex.
I think most standard buyers would struggle to get a mortgage that didn’t guarantee possession on completion.
The short answer is yes but obviously it does raise certain issues and does make it difficult to market.Originally Posted by Estoril-5
Best way to find a buyer might be via the local landlords association.
EDIT: Might make financial sense to pay the tenant to leave. You would probably save some legal fees and probably get a better price.
Last edited by David_D; 29th June 2020 at 10:30.
I’ve bought and sold with a tenant in so it’s doable. When I bought I had a new lease drawn up and ensured the deposit and rent were paid to me on the day of exchange and completion. When selling the buyer did a similar thing from memory. Some BTL lenders may technically want a vacant property on completion. Things like this need to be worked out with the tenants and the Estate Agents need to be cooperative and proactive.
The big thing I’d say is the type of property you’re selling. If it’s something ideal for the BTL market it will sell quite easily I’d imagine as there will be Landlord’s specifically looking for those types of properties. If it’s not the most suitable, or the rent isn’t reflective, expect a drop in price.
P.S. are you married? Could you put the property in your spouse name for tax purposes? Assuming here, they are not higher rate.
If the house is likely to attract an investment buyer, a sitting tenant won't be an issue.
I've bought properties with sitting tenants, so I didn't have the hassle of finding a tenant.
The down-side, is that the new landlord is getting an unknown tenant - he won't get the chance to properly vet them himself.
If the property is likely to appeal to first time buyers etc, then the sitting tenant becomes more of an issue.
If they have a tenancy agreement for a period of time, it may be best to wait until it moves to a monthly periodic tenancy, at which point you could give them their notice on the agreement of a sale.
The legalities will take at least a month, so this means you allow them the proper notice period and you sell as vacant possession.
Its a 1 bed flat in a not so great part of town, I bought it in 2006 for myself, we all know what happened in 2008, in 2009 I moved away for a new job and basically sold it at a loss or rented it out, so I was an accidental landlord. A recent mortgage renewal exercise suggested it was worth £18k more than what I paid in 2006 (that's not including the £6k I spent when I bought it as it was a repo). With the tax rules etc yes I guess I am losing money overall.
Its a 1 bed flat in an area where a good number of properties are let, so I think it may be easy to move on.
So the property is in my name, as is the mortgage, it was bought when I was young free and single. I do have a partner whose name it can be put into, but wont that mean effectively I have to sell it to her, attracting solicitor fees and stamp duty?
It is actually managed by an agent, they aren't great to be honest but that does mean the tenant has been vetted etc.
Its an ideal investment property or for first time buyers, its affordable as the mortgage valuation recently was under £100k.
there is however only approx. 60 years left on the lease, don't know if this will pose a problem to any potential buyers.
My letting agent is just that, lettings, so im going to have to find someone to sell it, I think this is going to get messy.
In the old days couldn’t an owner serve notice to vacate if they wanted to sell their property?
Only 60 years left, and a sitting tenant would reduce both the buyers and those offering a mortgage to them. However it would all depend on the buyer and their status with any lender - arranging a new lease on completion with any tenant would, as stated above, be a cleaner way of doing it.
Not sure how up to date this is but worth a quick look:
https://www.cml.org.uk/lenders-handb...ion-list/1846/
It's just a matter of time...
Yes, but the tenancy will have a notice period as a condition. Usually a month, but could be longer depending on the detail of the agreement
Exactly, so why would the OP try to sell with sitting tenants and not just serve a month (or whatever) notice?
Yes, I sold a bungalow with sitting tenants last spring. Works very well for the right buyer.
Having a good tennant could actually be a selling point with a property like this - assuming it's a shorthold tenancy agreement. It means the new buyer is up and running and earning money from day one. I've bought and sold with tennants and it's not an issue just so long as the tennancy agreement has been done properly. The 60 years won't help and it could be worth finding out how much it would cost to extend this before putting on the market.
You could sell to your other half, but as you say there are costs associated with that which would take a long time to get back through tax savings.
Presumably the rent cost is similar to the mortgage cost. Have you asked the tenant if they're interested in buying their home?
A 60 year lease may be a bigger issue than the sitting tenants. Most mortgage companies won't touch anything with less than 70 years so you are severley restricting your market of buyers.
As others are pointing out the 60 year lease will narrow your market much more than the sitting tenant. As Chris says it would be worth asking your tenants if they want to buy it as that could solve both issues. Once a lease goes below 80 years there is a premium to pay on top of the extension and the further below 80 it goes the more costly the premium.
Generally you can either top your lease up to what it was before or get a statutory 80 or 90 year extension. This can be done (or could be in 2012 when I last saw one done) by approaching the freeholder directly or employing your own surveyor and serving notice to your freeholder via a solicitor in something called a section 42 notice. From memory I think the section 42 method is much quicker and perhaps a bit cheaper in the long run.
Selling to my other half isn't ideal as we want to move the property on ideally.
Its a single parent with a disabled child, they are in no position to buy, I didn't want to mention it but its actually this point that makes me want to cause them less hassle as possible and hence asking if I could sell but someway let them stay.
Ive just checked its actually 58 years left, it doesn't fill me with hope.
So I have 58 years left on the lease which isn't great, the sitting tenants aren't the number 1 thing on my mind now.
Im going to dig out some paperwork and see what's what, by my calculation there was less than 75 years lease when I purchased the property but this wasn't highlighted as a potential future issue as far as I can remember, I don't recall my conveyancers being the best though.
i'll do a bit of headscratching and see where I stand.
p.s. anyone know how to calculating what the lease extension will cost me?
Last edited by Estoril-5; 29th June 2020 at 17:43. Reason: forgot to ask the main question
Hi all,
Thread bump. The tenants, a lady and her disabled son have handed notice and should be moving out in November. This is welcome as they are moving of their own accord rather than me pushing them out (I did think about it but it just didn't sit right with me especially as it was Covid at the time and the last thing anyone wanted was to be looking for new digs).
Anyway, now is an ideal time to sell for me, no tenant in place, can do any sprucing up i need to, and considering the lease length it will be an auction jobbie which should complete in 6-8 weeks I believe. Downside are the short lease will mean a smaller pool of buyers and potentially a lower sale price. Also interest rates and a slow market doesn't help but at this stage I want it gone.
I'm not interested in extending the lease.
So main question is who would be a good auctioneer to approach, two I have heard of is Bond Wolfe and SDL auctions. Can anyone vouch for either of these two or suggest other auctioneers?
Now you’re in a better position regarding tenant’s would it not be worth finding out how much it would cost to extend the lease, then you could market it through agents rather than auction it.
As you say it’s been valued at not a lot more than you paid for it, through auction you might actually lose money.
For the sake of the cost of a phone call/email/letter to the freeholder it’s got to be worth it.
Although extending the lease is an option, I don't want to go down that route (as this isn't in the BP I don't want to go into details on an open part of the forum, but I won't give another penny to the freeholder even if it costs me money).
Edit: although I could get more money, i think there are CGT payable also (i am not an expert though).
Last edited by Estoril-5; 9th November 2023 at 13:49. Reason: additional info
Leasehold reforms were (finally!) announced in the King’s Speech on Tuesday.
It may be worth waiting a few weeks to see the details and how long it’ll be before the changes take effect.
It sounds like you’d appreciate being able to force your freeholder into a 900+ year extension at a lower cost than a few decades worth!!
Certainly worth looking into.
https://homehold.org/standard-articl...he%20extension.
Yes, CGT payable on any profit you make, although you do have your allowance and I think you deduct any expenses as well, but stand to be corrected.
Sounds like you’ve had enough of the freeholder but I’d still find out figures before committing to selling through auction.
Have you contacted any agents to see what it’s worth on the open market, compared to any guide price through the auction house.
I believe another flat owner managed to extend his lease (99 years i think) for around £7k, I don't know if this is all in or just the lease part and legal costs extra. The management agent (which has been appointed by the freeholder) are next to useless. Charge a good fee for managing the place but wont even reply to emails.
Haven't had any valuations as the tenants don't move out till later on but when they do I will get some vals done. Reason for going down the auction route is that once the hammer goes down its pretty much a done deal and i can be done with it all, its one stress I can get rid off.
Have you ever lived in the property as your main home? If so, your CGT exposure might not be as bad as you think.
Your total gain is worked out by, sale price - purchase price - conveyancing costs to buy - conveyancing costs to sell - estate agent costs to sell = total gain
If you've ever lived there, then you get private residence relief on that, which is calculated by, total gain / number of months owned x (number of months lived in by you + an extra 9)
Your taxable CGT is then total gain - private res relief
Of that, you can deduct your annual allowance of £6k for this tax year
You then pay CGT of 28% on what's left, if any
yes, have lived there for several years, its a very poverty stricken area, doubt there will be any CGT to pay (i think i will be lucky to sell it for what i paid back in 2006).
Last edited by Estoril-5; 13th November 2023 at 13:10.
Hi all, wanted to ask the collective their thoughts.
I have potentially found three auctioneers that could sell my property. Bond Wolfe, SDL Auctions and Cottons. Has anyone had experiences of any of these businesses? Need a steer on which one to contact.
A big one here in the south is Clive Emson and up north there’s Roy Pugh.
It may be worth giving either or both a try too.
Could someone explain the lease part? I checked it on line, but still don't get it.
If Estoril-5 owns the property. Isn't he the landlord/freeholder?
Who would lease a home to someone for 999 years (for example). Basically couldn't get them out of the house. Even if you filled with with nitro
In Canada. You rent/lease a house on average year to year and sometimes monthly
Leasehold means that you just have a lease from the freeholder (sometimes called the landlord) to use the home for a number of years. The leases are usually long term – often 90 years or 120 years and as high as 999 years – but can be short, such as 40 years.
Thanks
DON
Take a building full of flats as an example. The freeholder owns the land on which the flats are built, and people buy the flats on top of that land with leaseholds. Those leases can be extended, so in effect they own the property, but they don't own the land because they're not the only one living on it.
So lets say. The building is a tri-plex apartment with 8 units
Units sold. Buyers own the units, but the landlord owns the land the building sits on. So basically a small condo building
So if a 40 year lease. At the end. Landowner shows up, tells you to pack your bags and get out as they're not extending the lease. Even though person owns the unit?
Found this in Ontario, Canada
Leasehold Condo Corporation
These are condo corporations built on leased land for a term between 40 and 99 years. Owners have a leasehold interest in the units and common elements but do not actually own the land. Some key points about leasehold condo corporations include:
Common expenses include a portion of the rent payable to the landowner (known as a maintenance fee)
Once the lease expires, the owner’s rights to occupy the condo unit is automatically terminated
Leasehold condo corporations are not common in Ontario
Why would anyone buy one of these?
It doesn’t work quite like that in the UK Don, the leaseholder has the right to extend the lease and for single properties on a piece of land, laws are in the pipeline (if not here already) allowing the homeowner to buy the freehold.
There are also a large number of apartment buildings which are leasehold but every property has an equal share in a company which owns the freehold.
If one person/company owned the lease on all of the flats, on expiration of a lease could they clear the land (hypothetically)?
That’s not strictly correct; they only actually own a long term lease on the property ie. the right to use it for a set period of time, they never technically own the property.
Any leaseholder therefore has to seek the landlord’s permission to carry out any alterations.
Yea that's now how it works in the UK. In effect if you buy a leasehold you're not going anywhere, you just need to extend it at the right time and front up a fee. Many start at 999 years and therefore won't even be a concern anyway. That said, personally I'd always prefer a freehold just to have more freedom.
Fair point.
Posting Permissions
Reply With Quote