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  • Buy-to-Let

    26 questions to ask when buying a property with tenants in situ

    I have Commercial Trust to thank for inspiring this post.

    They have put together a similar post, which I have extracted and built upon.

    These are the questions to ask if you are thinking of buying a property with tenants in situ. These are additional to my 21 questions to ask at an investment property viewing.

    About the tenants:

    1. How long have the tenants been at the property?

    2. Have the tenants ever been, or are they currently, in rent arrears?

    3. What references and checks were taken for the tenant?

    4. Do the tenants have rent guarantors? If so, what references and checks were taken for them?

    5. Are there any ongoing disputes with neighbours regarding antisocial behaviour?

    6. Does the current landlord expect to deduct costs from the tenants for damages to the property or goods provided with it?

    7. Have the tenant's ever been difficult to contact or refused access for such things as Gas Safety Check?

    8. Are the tenants in receipt of any Housing Benefit? If so, how is it paid?

    Questions about the property

    It is harder to analyse the condition of a property with tenants in situ; the clutter of belongings and the necessity of privacy prevent you from getting into every nook and cranny as you could with an empty property. This said, you should ask the seller the following:

    9. When was the boiler last serviced, and how old is it?

    10. Have any insurance claims ever been made against the property?

    11. Are there any outstanding repair issues or tenant requests that require attention?

    12. Has the property ever been treated for damp?

    13. Has there been a history of pest infestation at the property?

    14. Which items belong to the tenant and which items were supplied by the landlord?

    Questions about the tenancy agreement

    15. What type of tenancy agreement is in place?

    16. How long is left on the current tenancy agreement?

    17. Was the tenancy agreement drafted by a reputable law firm (and are there any associated copyright issues?)

    The type and duration of the tenancy agreement are very important, particularly as there is a chance of acquiring a property with a ‘sitting’ (i.e. ‘protected’ or ‘regulated’) tenant – generally bad news for a landlord. No new regulated tenancies have been created since 1989, though it is possible to inherit one by purchasing a property with tenants in situ.

    18. What rent is being achieved? Is it comparable to market rents in the area?

    19. When was the rent last increased?

    Questions about the management of the property

    20. Has the property been managed by a letting or managing agent?

    If yes:

    21. Have they done a good job of managing the property?

    22. Are they accredited?

    23. How much do they charge for their management service?

    Regardless of who currently manages the property, there are a number of documents you will need in order to fulfil your obligations as a landlord. These include:

    Proof of any deposit taken, proof of its protection in a custodial scheme, and copies of the prescribed information (more in this shortly)

    The most recent electrical safety certificate
    The energy performance certificate (EPC)
    The most recent gas safety certificate
    The HMO (house in multiple occupation) license, if applicable
    Any insurance documentation relating to the property or contents provided with it
    The inventory form, if one was taken
    A copy of the full tenancy agreement

    Questions about the tenancy deposit

    This is a potentially sticky area, and you should always be sure to ask:

    24. Did you take a safety deposit from your tenant?

    25. If so, did you protect the deposit and issue the prescribed information?

    Questions to ask your lender:

    26. If you are using finance, be sure to check with your lender that they will lend on a tenanted property. TMW are one such lender who will do so. Most lenders will not accept a tenancy agreement longer than 12 months.

    Anything I have left out?

    [Image: house.png]Related content:

    The pitfalls of buying with sitting tenants

    No inventory? You are giving your tenants an unfair advantage!

    21 questions to ask at an investment property viewing

    13 costs associated with purchasing a BTL property

    Buying a tenanted property

    Buying at auction with sitting tenant

    Buying with tenants in situ

    Buying a property with a tenant in it

    Buying a property with tenants in situ
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    We are being approached more and more now by accidental landlords who want to exit but dont want to evict their tenant.

    Although we like choosing our own tenants we are not averse to this as quite often theres a deal to be done.

    The list above is very good but intially the most important questions for us are:-

    1/ Is there a properly prepared AST and can i see it? - I never cease to be amazed how many landlords dont bother or create their own which isnt worth the paper its written on.

    2/ How do they pay and have there been any issues ?

    3/ Are they working or LHA and is there a guarantor?

    I will then drive by, at least 3 times at different times of the day mid-morning, tea-time and late evening..

    I particiularly want to know

    1/ Is the tenant taking care of the property or is there rubbish piled up on the front of the property

    2/ Are the curtains opened during the day? This drives me nuts, bad tenants dont open curtains or windows - Its always a tell-tale sign

    3/ Do people congregate outside- groups of kids etc.

    If we then progress the purchase we would obviously inspect the property, talk to the tenant, ask then if they are happy and if they have any issues with the property, check out who is living there (If its a single mum and child , are there signs of a guy living there too? He may be working, making the LHA claim fraudulent) and depending on gut instinct we may ask them to provide info for a credit check.

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    Phil Stewardson.

    Stewardson Properties.

    Stewardson Developments Ltd.

    Burson Land Ltd. & Jennings & Gilchreaste Ltd.

    http://www.stewardson.co.uk

    Follow me on twitter - @philstewardson


    Thanks for that helpful input Phil.

    The tip about curtains closed during the day is interesting!!

    Maybe they just closed them for security purposes while they were out at work though?

    At our holiday let, we ask all guests to close blinds and curtains during the day if they are out, for security reasons.
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    If you are contemplating evicting the tenants eg to re-develop the property then read on:

    What date did the tenants move in?

    Can you please provide a statutory declaration confirming the date the tenant moved in, and exhibiting a copy of the tenancy agreement, confirming whether or not a deposit was taken and exhibiting proof of protection and service of the prescribed information. (If the fixed term has expired then you also need confirmation of re-service of the prescribed information as per the decision in the Superstrike case).

    If the tenants moved in before 27 February 1997 you will also need to have proof that s20 of the Housing Act was complied with (otherwise the tenant may be able to claim that it was an assured tenancy) so you will need the landlord to provide a statutory declaration confirming service of the s20 notice prior to the tenancy agreement being signed. It should also exhibit a copy of the tenancy agreement which must be for a fixed term of six months or more.

    If the tenants moved in before 15 January 1989 be aware that you will almost certainly not be able to evict them.
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    Tessa Shepperon Landlord Law | Landlord Law Blog |

    Vanessa,

    I perhaps did not explain very well, I didn't mean tenants closing the curtains during the day, I meant more never opening curtains or windows.. Always a tell-tale sign of a bad tenant as well as a cause for ventilation/condensation issues.

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    Phil Stewardson.

    Stewardson Properties.

    Stewardson Developments Ltd.

    Burson Land Ltd. & Jennings & Gilchreaste Ltd.

    http://www.stewardson.co.uk

    Follow me on twitter - @philstewardson

    talk to the tenants or rather get the tenants to talk to you. If they know their landlord is selling with them in situ they have a vested interest in a potential new landlord.

    Its surprising what info you can glean from an informal chat and the tenant can give info about the property and themselves without thinking.

    If its a single mum type tenant then get the wife along and get them chatting to the tenant whilst cooing over the baby. Getting peoples guard down can produce all sorts of interesting information pertaining to tenant and property..

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    On the deposit I would check that all the prescribed information has been served at every renewal etc and ask to see it.

    For HMOs I would also check planning status and whether the council tax valuation officer has been in touch. If there is a superior lease has permission to sublet been sought and will there be a fee for further sub-lets

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    David Smith
    Landlord & Tenant Solicitor
    Anthony Gold Solicitors

    Find me on LinkedIn: uk.linkedin.com/in/dsnsmith

    All opinions are my own and do not reflect those of my firm. No comment made should be taken as legal advice and you should consult a solicitor or other legal professional for advice on your specific situation.

    I'm buying a property with a tenant in situ and I'm debating with myself what's best practice regarding documentation with the new tenant and the logistics of arranging getting bits of paper signed and monies etc.

    Given that I want to increase the rent (the tenant has agreed to this), and take and protect a deposit (the tenant currently hasn't given a deposit and has agreed to this), then I think it makes sense to issue a new 6 month AST and start as if it's a new tenancy. That means I need:

    1) AST signing
    2) Deposit taking
    3) Prescribed information given
    4) EPC given
    5) The new How to Rent booklet given
    6) A new inventory done
    7) Possibly a new Housing Benefit application doing (for increased rent) and payment changing

    That's all no problem, but what I'm not clear on is how to tie that lot in with the exchange and completion of the purchase?

    I'm thinking it's best ensure the AST is signed but undated and deposit money is given to the vendor's solicitor for transfer as part of the purchase, with the solicitor filling in the AST date on the day of completion.

    Anyone got any thoughts on this / alternative experience?
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    Great discussion topic Vanessa and a really helpful check-list! Great comments from everyone above too!

    At Vesta Property we help landlords to buy and sell tenanted property. Buyers we deal with almost always ask for the following information:

    1. The AST
    2. The rental payment track-record and whether there are any arrears
    3. The notice period
    4. The amount of the deposit
    5. How long have the tenants have been in the property for

    Of course, 3., 4. and 5. can all be found in the AST. However, it's interesting to hear those questions.

    3. and 4. are for risk mitigation (e.g. what happens if things sour and the new landlord needs to start proceedings to remove a tenant, and what's the extent of the deposit to cover any appropriate damages). Whilst 5. demonstrates how attached the tenant is to the property (if they've been there a long-time) and may also help to justify situations where the rental income is a bit below market value.

    Like MatthewS says, the tenants should have a vested interest in a new landlord buying the property, and of course they'll become your customer. So get to know them!

    Kind regards,

    Team Vesta

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    Great thread Vanessa, great tick list of questions for an investor/landlord in this situation.

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