Advice on the implications of the Renters’ Rights Bill when buying a tenanted property
Insight
Each month, the Farrer & Co Residential Property partners give us a brief insight into their working lives. This month, we give an overview of advice given to clients on the implications of the Renters’ Rights Bill (Bill) if they were to purchase a London townhouse subject to an existing tenancy.
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The Brief
Our clients, a British expat couple living in Hong Kong, were recently back in the UK and fell in love with a Georgian townhouse for sale in Richmond. The basement flat within the house had been let on an assured shorthold tenancy (AST) to a top-quality tenant. The original fixed term had expired and the tenancy was continuing as a monthly periodic assured tenancy. Our clients wanted to submit an offer to purchase the property and approached us for advice.
Executing the Brief
Completion of the purchase was proposed for June this year. The current tenant wanted to remain in the property after completion and vacate later in the year. This appealed to our clients as they were unlikely to move back to the UK until autumn or winter this year. Keeping the tenant in place would enable them to receive an income in the short term and would also assist with the security of the property until our clients were ready to move in.
Our clients wanted to know their position if they were to complete their purchase of the property with the tenant in situ and allow the tenant to remain in the basement flat for a few months after completion.
We explained that buying a property where a tenant remains in occupation does come with risk. Under the current law, to bring an AST to an end, a landlord needs to serve a section 21 notice giving at least two months’ notice to the tenant. If the tenant refuses to vacate upon expiry of the notice, the landlord needs to apply to court and the tenant can only be forcibly removed by court-appointed bailiffs once a possession order has been made. This is a protracted and costly process. Due to current court delays, if the tenant is difficult and refuses to vacate, it can take six months or more to recover possession.
We explained that the changes which are due to be introduced under the Bill will also affect our clients’ position. If a valid section 21 notice has not been served on the tenant prior to the Bill becoming law, our clients would be bound by the new legislation. Our clients would still be entitled to terminate the tenancy on the basis that they are moving into the property (as this is a permitted ground for termination under the new law). However, it will take longer to obtain vacant possession than it will do under the current law. Our clients would need to give the tenant at least four months’ notice of their desire to move in. It is even possible that they may need to wait for twelve months before the tenancy can be terminated (because arguably the current drafting of the Bill provides that tenants may be protected for twelve months following the date the landlord changes). Again, if the tenant refused to vacate at the end of any notice period, our clients would then need a court order. It is anticipated that the court delays will get worse once the new legislation comes into force. Overall, our clients may face a long wait before they could recover possession of the basement flat.
The debrief
Our clients decided that, ultimately, they did not want to be responsible for ensuring the tenant vacated the basement flat, particularly given the complications that the new legislation would bring. The basement flat was key to their desire to purchase the property as it would provide accommodation for their live-in nanny so they were not prepared to risk waiting to recover vacant possession of it.
Our early involvement meant we were able to assist with negotiations on this point from the outset. Terms were agreed within 24 hours of our clients submitting their offer and the sellers agreed that completion will be conditional upon vacant possession of the whole of the property.
We understand the sellers are equally nervous about removing the tenant and the potential impact of the Bill so have already served a section 21 notice on the tenant and are seeking assurances from him that he will vacate on completion. They may delay exchange until he has left.
Our Q&A on the Bill looks at how the legislation will impact tenants and landlords in relation to the termination and variation of assured tenancies.
We would also refer you to our longer articles Renters’ Rights – taking the long view and The law (of unintended consequences) which further examine the impact of the Bill.
We are always happy to discuss the conveyancing process and how to manage a transaction.
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This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.
© Farrer & Co LLP, March 2025
