This matters because the private rental sector accommodates 19% of English households, rising to 27% in London.
The latest tax data will take a while to collate, but the estate agents’ trade body Propertymark reported in December that landlords selling off their properties had increased by 13% between July and October. Last year’s reporting also indicate that 70,000 UK landlords left the private rental sector, taking with them 116,000 properties.
Having made the decision to sell one or more properties, what happens next is complicated and stressful for landlords and even more so for their tenants.
Despite this, there are ways in which landlords can soften the blow for renters — as well as things tenants can do to help themselves.
First and foremost is to understand where you stand if your landlord decides to sell up. The key thing is that the decision to sell doesn’t change the terms of your tenancy agreement. You can’t be asked to vacate immediately just because your landlord wants to put your flat on the market. Equally, your landlord can’t simply intrude on your privacy to start showing prospective buyers around without your express permission.
In theory, a landlord could sell the property without even telling you, since sales do occur sight unseen (though it’s not something I’d recommend). However, even an actual sale doesn’t change the terms of your tenancy. You can’t be evicted without notice, which cannot be less than two months, or without a complex array of notices, including the controversial Section 21 notice, being correctly served. These are easy for even the best intentioned landlord to get wrong, so it’s worth checking with the housing charity Shelter or the Citizens Advice Bureau if you’re unsure.
Now, you could simply dig your heels in and be as obstructive as possible. This would certainly get a non-communicative landlord’s attention. But cooperating might improve the longer-term outcome. You would be well within your rights to be present at viewings. And then you can ask prospective buyers about their intentions regarding the property and raise the possibility of you staying on after the sale.
You should discuss this with your current landlord before the property even comes to market. If nothing else, you might gain an understanding of why they are selling. Many sales are being driven by expiring fixed-rate mortgage deals. The issue isn’t simply one of cost. With mortgage rates rising, lender affordability criteria mean that many more leveraged landlords won’t be able to borrow as much as they owe on their expiring deal. A small rise in the rent may ease the way, so it’s important to have an awareness of where market rents stand. Perhaps you can stomach a monthly increase that would be less than how much you’d have to pay if you were to move.
If it is agreed that you can stay on after your landlord has sold, that probably means that your home will be offered at auction. Although tenanted properties rarely appear on the property portals or at your local estate agent, it is common for tenanted properties to appear in auction catalogues.
Indeed, 126 of the 314 lots to be offered at Allsop’s upcoming February London sale are described as “investments,” mostly because they have sitting tenants. Prospective buyers can then bid according to the yield they are seeking.
Conventional wisdom has it that tenanted properties sell for less, but that is not always the case, especially when the private treaty market (direct deals between individuals, usually facilitated by an estate agent) is slow. So you might be able to persuade your landlord to sell this way. Added to which, at auction, contracts are exchanged the moment the hammer falls and completion follows within four to eight weeks.
In contrast, agreed private treaty sales frequently collapse before contracts are even exchanged. According to estate agent Savills, 32% of agreed sales fell through in the final quarter of 2022, up from 24% earlier in the year. A collapsed sale leaves landlords with no rental income with which to pay their mortgages, and they also become liable for council tax and utility bills. Keeping the tenant in place avoids all of that additional expense, so is worth discussing for both parties.
If you can persuade your landlord to sell with you in place, there’s one more thing that would increase your security. A new tenancy agreement, committing you to a further six to 12 months, would allow you enough time to gauge the intentions of any new owner. Even after a sale, a new owner must abide by the terms of any preexisting tenancy agreement. They can even find themselves liable should the original tenancy not have been executed properly in the first place.
Clearly, none of this is ideal and these are stressful times, but if you understand that a sale (or intended sale) doesn’t diminish your rights, it might give you the leverage as a tenant to negotiate a more favorable outcome and make the best of a bad job.
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This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Stuart Trow is co-host of “Money, Money, Money” on Switch Radio and author of “The Bluffer’s Guide to Economics.” Previously, he was a strategist at the European Bank for Reconstruction and Development.
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