Buy-to-let property with tenant explained: how does it work?

We are thinking of investing in a buy-to-let property. How does it work if we buy a flat with a tenant with a assured shorthold tenancy?

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Fiona McNulty13 July 2019

Question: We have some savings and want to invest in a buy-to-let property for the first time. A flat which already has a tenant with an assured shorthold tenancy has been suggested to us. How does this work?

Answer: Most residential properties are sold with vacant possession but it is possible to sell one with a tenant in occupation and the most common tenancy agreement is an assured shorthold tenancy, which often lasts for just six months.

Ensure your solicitor is aware that the tenant is to remain after you complete the purchase, so that they can investigate the terms and length of the existing tenancy and the tenant’s security of tenure; if there are rent arrears; whether rent would be paid to you directly or to letting agents; if there is deposit protected under a tenancy deposit scheme, and if all the required information has been provided to the tenant.

The contract would provide for the flat to be sold subject to the existing tenancy and a copy of the assured shorthold tenancy agreement should be attached to the contract.

If the property is furnished, then an inventory should be prepared and also attached to the contract.

When you complete the purchase the seller’s solicitor should hand to your solicitor the original tenancy agreement together with an authority signed by the seller addressed to the tenant requiring them to pay the rent directly to you as the new landlord from the completion date, or to your letting agent if you have one.

These answers can only be a very brief commentary on the issues raised and should not be relied on as legal advice. No liability is accepted for such reliance. If you have similar issues, you should obtain advice from a solicitor.

If you have a question for Fiona McNulty, emaillegalsolutions@standard.co.uk or write to Legal Solutions, Homes & Property, Evening Standard, 2 Derry Street, W8 5EE. Questions cannot be answered individually, but we will try to feature them here.

Fiona McNulty is a solicitor specialising in residential property.