I have been letting a property for the last number of years. With the property market improving, I am considering selling the house. Currently I have tenants residing there. I am wondering whether it would be better to have the tenants vacate the house before it is shown to prospective purchasers, or to leave the tenants in situ. What are the advantages and disadvantages of pursuing these options, and do you foresee any difficulties in asking the tenants to vacate the house for the purpose of selling the house?
Before you consider the advantages and disadvantages of leaving your tenants in situ for the duration of the sale, you need to consider their rights of residence in the property and the notice period required for them to vacate. They may be under no obligation to facilitate viewings or access to the property while you are selling it, and as such you should examine your lease agreement with regard to this.
Under Section 34 of the Residential Tenancies Act 2004, a landlord can terminate a Part 4 tenancy should they wish to sell the property. A tenant acquires the benefit of a Part 4 tenancy once they have remained in occupation for a period of six months. The landlord must, however, ensure that adequate notice is served.
The notice period varies depending on the length of time the tenant has been in occupation. The notice period under the act is as follows:
Notice period Duration of tenancy 28 days Less than 6 months 35 days 6 months or more but less than 1 year 42 days 1 year or more but less than 2 years 56 days 2 years or more but less than 3 years 84 days 3 years or more but less than 4 years 112 days 4 or more years.
Your tenancy may be a fixed term tenancy. This is essentially a tenancy that has been agreed for a fixed term, ie one year, from a date. Usually this is contained within a written lease, although it could also be oral or implied. In the event of a fixed term tenancy, the landlord can only terminate such a tenancy where the tenant has been in breach of his or her obligations. The landlord cannot rely upon section 34 of the Act to gain vacant possession.
Now examine the advantages and disadvantages of having your tenants occupying your property during the sale period.
The advantages are as follows:
nYou will continue to receive rental income during the sale.
nYour property will be occupied, so you do not have to worry about it being vacant. Your tenant, in effect, is a caretaker.
nProspective purchasers will view your property with a “lived in feeling”. It won’t have an atmosphere of emptiness, unlike a vacant property.
nThe tenant may be under no obligation to facilitate viewings. which are often in the evenings, Saturdays etc.
nThe tenant is also under no obligation to present the property for sale the way that you may wish them to do so.
nGiven there is a tenancy, the closing date of the sale, ie the date that the eventual purchaser moves in and you are paid the purchase price in full, cannot take place until after your tenant vacates. This may take more time than a purchaser might be happy with. As you can see from the statutory notice period above, it could take almost four months.
Talk to your estate agent and get their opinion. They will be the ones having to work around the tenants when it comes to viewings so their input matters. Be honest: if your tenant is likely to be difficult about facilitating viewings for whatever reason, your agent needs to know. They will be used to dealing with situations like this, so take their advice.
You should discuss the tenancy with your solicitor because you need to follow the correct procedure prior to the sale. You may be advised to give your tenant notice to vacate, irrespective of them remaining in the property during viewings.
You may also consider giving them an incentive to facilitate viewings and to remain in the property during the process. Many landlords give a sweetener of a few months rent reduction to compensate for any hassle.
John O Sullivan is a member of the Society of Chartered Surveyors Ireland.