7 min read
Selling a rental property in the UK involves additional considerations, including tenants, tax, and legal requirements. My Home Move Conveyancing’s guide sets out what landlords need to consider before selling and how the process works.
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You can sell a rental property with tenants in situ or with vacant possession, and the choice affects price, speed, and buyer demand.
Capital Gains Tax (CGT) may apply when selling a buy-to-let, so it’s important to factor this into your decision early.
Preparing documents, understanding tenant rights, and choosing the right selling method can help avoid delays and failed sales.
The process of selling a rental property depends on factors such as whether tenants remain in the property, how it is prepared for sale, and the type of buyer you are targeting. Understanding these factors early can help reduce delays and avoid complications during the sale.
In this guide we cover:
Before putting your property on the market, you’ll need to consider the following:
Market Research: Conduct a thorough analysis of the local property market to determine the current value of your rental. Consider factors such as recent sales, property trends, and economic conditions.
Property Assessment: Assess the property's condition, including any necessary repairs or renovations. A well-maintained property can attract higher offers and potentially command a premium price.
You can choose to sell your property with tenants in situ or serve them notice and sell with vacant possession. This decision affects who you can sell to, how quickly the property may sell, and the price you could achieve.
There are advantages and disadvantages to both, which we will explore below, to help you consider the right option for you and your circumstances.
When selling a property with tenants in situ, you will still have the rental income whilst the sale goes through. It can also be a selling point to other prospective landlord buyers as they won’t have to spend time or money finding new tenants once the transaction has completed.
There are some points to consider when selling with the tenants in situ:
Narrowing the market: By selling with tenants in situ, you are restricting who might be interested in your property exclusively to buy-to-let landlords, and excluding those who might want the property to live in themselves. This could mean that it takes longer to sell or sells for less.
Arranging viewings: Tenants rights will need to be considered when the property is being marketed and viewings are taking place. You should check the terms of the tenancy agreement to see if there is a clause regarding the tenant allowing viewings.
The tenant could serve notice: The tenants could decide to service notice whilst the conveyancing process is going on. This could be an issue if the buyer has put an offer in on the basis that the property is already occupied, which could cause them to pull out.
Selling with vacant possession means that those living in the property will have to have vacated by the time the sale completes. This means that you can sell your property to any potential buyer, and not just landlords.
If you have tenants in the property, but you wish to sell with vacant possession, there are a number of things you need to consider:
Notice Period: You will need to give your tenants sufficient notice to vacate before the property sale completes. The notice period to terminate the tenancy is based on the tenancy agreement, however it is typically two months.
Tenant Rights: Respect tenants' rights and adhere to legal procedures if you need to evict them.
Negotiation: Consider discussing a mutually agreeable early termination date with your tenants.
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Preparing your rental property for sale can be trickier than with a main residence, especially if you have tenants.
Depersonalisation: Remove personal belongings to allow potential buyers to envision themselves living in the property. You’ll have to work with your tenants as it is still their home, and you’ll need to provide ample warning to them before any prospective buyers visit.
Redecorating and staging: Consider redecorating, giving your property a lick of paint, or even professional staging to enhance the property's appeal and create a welcoming atmosphere. Again, if you have tenants in situ you will need to work with them to cause minimum disruption.
Curb Appeal: Ensure the exterior of the property is in good condition, including landscaping, driveway maintenance, and exterior paint.
Up-to-date documents: if you are selling with tenants in situ or to other landlords, it can be worthwhile checking all the mandatory rental documents are up to date, including the EPC, gas safety certificates and electrical safety certificates. You might also want to prepare a financial information pack, showing the income and outgoings of the property.
There are several ways you can sell your rental property:
High street Estate Agent: Compare valuations, fees and services from different local estate agents. Consider their experience in selling rental properties, marketing strategies, and local market knowledge so you can choose the right one for you.
For Sale by Owner (FSBO): Explore the advantages and challenges of selling your property yourself. This can save on agent fees but requires more time and effort.
Online platforms: Utilise online property marketplaces to reach a wider audience. However, be prepared to handle enquiries and viewings yourself.
Viewings: Prepare your property for viewings and be ready to answer potential buyers' questions.
Offers: Negotiate offers carefully and consider factors such as price, terms, and conditions.
Conveyancing: Engage a solicitor to handle the legal aspects of the sale, including contract negotiation, property searches, and transfer of ownership.
Investment and rental properties are normally subject to Capital Gains Tax (CGT) if they are sold at a profit.
Capital Gains Tax can be charged at up to 24% on the gain made when selling a rental property. This may impact your decision to sell, as it reduces the net amount you receive after the sale.
Taxable Gains: Calculate the profit made from selling the property, taking into account the purchase price, improvements, and any allowable expenses.
Exemptions and Reliefs: Explore potential exemptions or reliefs, such as Private Residence Relief, that may reduce your CGT liability.
Professional Advice: Consult with a tax advisor to ensure you're taking advantage of all available tax benefits.
Capital Gains Tax rates on residential property currently stand at 18% for basic rate taxpayers and 24% for higher and additional rate taxpayers. These rates apply to the gain made when selling a rental or investment property. For the most up-to-date guidance and allowances, visit gov.uk.
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