Navigating the Challenges and Opportunities of Having a Sitting Tenant in Your Property

What Is a 'Sitting Tenant,' and How Do UK Landlords Handle One?

In the UK property market, a "sitting tenant" is a tenant who lives in a property with legal rights that make it challenging for a landlord to regain possession of that property. For landlords seeking to purchase or sell properties with current tenants, understanding these rights is essential to make informed investment and management decisions.

Sitting tenants can offer landlords steady rental income, but they also bring specific legal obligations and unique challenges. Here’s an overview of what sitting tenants are, the types of tenancies they hold, and tips for landlords on managing these tenancies effectively.

What Is a Sitting Tenant?

A sitting tenant occupies a property under a tenancy agreement granting them specific legal rights to remain. This often refers to regulated or protected tenancies established before January 15, 1989, under the Rent Act 1977. Tenants in these agreements have extensive security of tenure, allowing them to stay in the property for life with rent controlled by law.

Tenants under newer agreements, such as assured shorthold tenancies (ASTs), have fewer protections, and landlords can generally recover possession more easily, though formal procedures must still be followed.

Types of Tenancy Agreements Involving Sitting Tenants

1. Protected or Regulated Tenancies (Pre-1989)

• Tenants have the right to remain in the property for life, often at below-market rent levels.
• Rent increases are restricted by law, and eviction is challenging.

2. Assured Tenancies (1989-1997)

• Assured tenants have more rights than AST tenants and enjoy security for the tenancy’s term.
• Rent increases must be "reasonable" and reflect market rates but may require a Rent Assessment Committee review.

3. Assured Shorthold Tenancies (ASTs) – Post-1997

• AST tenants have the fewest rights, and landlords can usually regain possession at the end of the fixed term with a Section 21 notice, as long as the proper process is followed.

How to Manage a Sitting Tenant as a Landlord

Having a sitting tenant may be complex, especially if planning to sell the property or undertake major renovations. Here are several strategies for landlords on managing sitting tenants.

1. Know Your Legal Rights and Obligations

• For regulated or assured tenancies, understand the tenant’s extensive rights under UK law.
• With regulated tenancies, tenants’ rights to remain are highly protected, and attempting to remove them without valid legal reason may lead to severe penalties.
• With ASTs, landlords have a right to regain possession, but only by following the correct procedures, such as giving proper notice and, if necessary, adhering to eviction laws.

2. Negotiate with the Tenant

• In some cases, landlords negotiate for tenants to voluntarily vacate the property, often through a “tenant buyout” or "cash for keys" arrangement.
• This involves offering a financial incentive for the tenant to leave. A solicitor should be present to ensure agreements are documented properly, as tenants are under no obligation to accept.

3. Consider a Cooperative Approach with the Tenant

• Some landlords choose to work within the framework of the tenancy rather than seek possession.
• If you’re selling the property, a sitting tenant can be an advantage, as some buyers seek properties with tenants in place for immediate rental income.
• For landlords retaining the property, cooperating with the tenant can often lead to a stable, long-term rental income.

4. Evaluate Rent Increases (Where Permitted)

• For regulated tenancies, rent increases are heavily restricted and may only be adjusted by a Rent Officer.
• For assured and ASTs, landlords can increase rent in line with the market rate by serving the correct notice or renewing the tenancy at the new rate. Always consult the tenancy terms and seek legal advice to ensure compliance.

5. Selling a Property with a Sitting Tenant

• Selling a property with a sitting tenant is more complex, as prospective buyers must be willing to take on the tenant and respect their rights.
• Properties with sitting tenants may have lower valuations due to the restrictions on gaining vacant possession, especially in the case of regulated tenancies.
• Some buyers specifically seek properties with sitting tenants for immediate rental income. When marketing, present the property as an investment and fully disclose the tenant’s rights.

Pros and Cons of Having a Sitting Tenant

Pros:

• Steady Income: A tenant in place provides stable rental income, often with few occupancy gaps.
• Reduced Tenant-Finding Costs: Long-term tenants reduce the need for advertising and letting agency fees.

Cons:

• Limited Control Over Property: Sitting tenants, especially those with regulated tenancies, may restrict a landlord’s ability to make changes or regain possession.
• Reduced Property Value: Properties with sitting tenants may have a lower value due to the restrictions involved in evicting the tenant or adjusting rent.
• Restricted Rent Increases: Rent increases for regulated tenancies are limited by law, often resulting in below-market rates.

Final Thoughts

Sitting tenants add a layer of complexity to property ownership for landlords who may be unfamiliar with the specifics of tenant rights under UK law. Whether you’re dealing with an existing sitting tenant or considering a property investment with one, understanding the tenant’s rights and your obligations is essential for effective property management.

If you’re thinking about investing in a property with a sitting tenant, call our team at Argant Estates. Our experts can help you navigate your options, maximize your property’s potential, and ensure full compliance with UK law. For more information or to join our exclusive buyer list, contact us today!