8,500 tenanted homes currently on the market
8,500 tenanted homes currently up for sale as TLP highlights importance of clean client money handovers
More than an estimated 8,500 homes are currently being marketed for sale with tenants in situ across England, according to the latest analysis by The Letting Partnership, presenting landlords with the opportunity to acquire an investment generating rental income from day one.
However, The Letting Partnership warns that while purchasing a property with an existing tenant can remove the initial void period and cost associated with finding and securing a new tenant, landlords are also taking on an existing tenancy and its financial history, making a clean client money handover an important part of the transaction.
The Letting Partnership analysed the number of properties currently listed for sale with tenants in situ across each region of England and compared this with the wider level of available sales stock.
Tenanted sales most prevalent across northern regions
The research shows that there are currently an estimated 8,553 properties being marketed with tenants in situ across England, equivalent to 1.8% of the estimated 470,922 homes available and currently listed for sale.
Yorkshire and the Humber has the highest proportion of tenanted properties relative to available sales stock, where 1,575 tenanted homes equate to 5.1% of the 31,143 properties currently listed.
The North West follows closely behind. Some 2,227 properties are being marketed with tenants in situ, the largest total of any region and equivalent to 4.6% of available sales listings.
The North East also ranks highly at 4.3%, with 601 tenanted properties currently on the market compared with 14,113 available listings.
At the other end of the table, just 0.3% of available sales listings in London are being marketed with tenants in situ, rising to 0.7% in the South West and 0.9% across the South East.
Tenants in situ can offer landlords income from day one
For landlords looking to expand their portfolios, purchasing a property with a tenant already in situ can bring some clear advantages.
With an existing tenant already paying rent, the new owner can benefit from rental income from the point they take ownership, while also avoiding an initial void period and the time and cost associated with finding and securing a new tenant.
The financial handover needs careful management
However, acquiring an already-tenanted property also means taking on an existing tenancy and the financial history that comes with it, making the handover of client money and accounting records an important part of the transaction.
The tenancy deposit needs to be accounted for and the existing protection arrangements checked so that the appropriate transfer or re-registration can take place. The historic rent ledger should also be reconciled to establish whether rent is fully up to date and identify any outstanding arrears or other balances attached to the tenancy.
Timing can create an additional accounting consideration. Where completion takes place part-way through a rental period and rent has already been paid to the outgoing landlord or agent, the relevant amount may need to be apportioned as part of the completion process to reflect the period for which the new landlord owns the property.
The Letting Partnership says these checks are particularly important because while the property may change hands on a single day, the financial history of the existing tenancy does not simply start again from zero.
A clear audit trail covering the deposit, rent received, any outstanding balances and the handover of relevant tenancy and financial information is therefore key to ensuring a clean transition between the parties involved.
Chris Mason, COO of The Letting Partnership, commented:
“Buying a property with a tenant already in situ can be an attractive proposition for landlords. Rather than acquiring an empty property and then having to find a tenant before generating a return, the income stream is already established from day one.
But landlords need to remember that they aren’t just acquiring the property and the tenant, they’re also taking on the financial history of that tenancy.
That means understanding exactly where the deposit sits and how it is protected, whether the rent account is completely up to date and whether there are any outstanding balances. If completion takes place part-way through a rental period, there may also be rent already collected that needs to be correctly apportioned between the outgoing and incoming landlord.
This is where accurate client accounting and a clear audit trail become extremely important. The ownership of the property might change overnight, but the tenancy doesn’t, and neither does everything that has happened financially before completion.
For landlords and agents alike, a clean handover means knowing exactly what money is held, what has been paid, what remains outstanding and ensuring the records supporting that position transfer with the tenancy. Getting that right allows the incoming landlord to enjoy the benefits of an established tenancy without inheriting avoidable accounting problems.”
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